A New Netflix Versus Blockbuster Rivalry Brewing

By Frank Yu
Frank Yu
Frank Yu
September 5, 2011 Updated: October 1, 2015

Netflix headquarters is pictured in Los Gatos, CA this past April.  (Ryan Anson/AFP/Getty Images)
Netflix headquarters is pictured in Los Gatos, CA this past April. (Ryan Anson/AFP/Getty Images)
NEW YORK—Netflix Inc., the high-flying video streaming and movie rental company, may be facing a new incarnation of old rival Blockbuster in the near future.

Pouncing on Netflix’s recent price hike, satellite operator Dish Network is reportedly launching a new Blockbuster video streaming service to compete with the likes of Netflix, Hulu, and Vudu.

Dish acquired Blockbuster for $320 million out of bankruptcy in April, and analysts expected the satellite company to capitalize on the growth of the online video streaming market and the brand name of Blockbuster. Currently, Blockbuster On Demand only sells streaming rentals individually, but the expansion of the service will put Blockbuster on par with the service offerings of Netflix. Blockbuster also has a DVD-by-mail service.

After some bitter competition, Netflix probably did not expect Blockbuster to rise up from the ashes after it filed for bankruptcy last year.

Several years ago, the question was whether Netflix’s DVD-by-mail business model would survive in a world of local brick and mortar video rental chain stores. But with the advent of broadband Internet and high gas prices, consumers moved away from video rental chains and onto DVD-by-mail.

Today, Netflix is busy perfecting its business model, and has expanded aggressively, first to Canada, and now to Latin America. Monday, Netflix launched its video-on-demand service in Brazil, and other Latin American countries will be able to view content later in the week.

New Blockbuster

But today, it appears the new Blockbuster may be stealing Netflix’s thunder. Last week, negotiations broke down between Netflix and Starz, where Starz declined to renew its contract with Netflix to stream its library of movies on Netflix. The companies disagreed over the value of Starz’s content.

The breakdown of talks couldn’t come at a worse time. Netflix this month began implementing its new pricing policy and raising the prices for most of its 25 million subscribers, including a whopping 60 percent price hike for subscribers of both online streaming and DVD-by-mail. Last week’s decision by Starz severely dented Netflix’s available library of streaming movies.

According to Bloomberg, Starz content will be available on Blockbuster once its streaming service launches.

In addition, since Dish’s acquisition of Blockbuster’s assets, Blockbuster has stemmed its store closures and has opened additional video rental kiosks. With a new streaming service set to launch, Blockbuster has seemingly risen from the ashes a stronger competitor.

Frank Yu