Competitors circle around as Netflix stumbles

Thu Sep 22, 2011 9:41pm EDT
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By Lisa Richwine and Rachana Khanzode

LOS ANGELES (Reuters) - Missteps by Netflix Inc have opened the door to competitors seeking to grab disgruntled customers who are looking for new options for video rentals and instant online streaming.

Blockbuster, the once-dominant video store chain that Netflix pushed into bankruptcy, wants to reclaim its crown. Now a unit of Dish Network Corp, Blockbuster is expected to announce its jump into the streaming market on Friday.

That would better position Blockbuster to compete with Netflix, which is now facing a subscriber backlash over a price increase for DVD subscribers and pressure from Hollywood studios to pay more for content.

Shares of the one-time Wall Street darling have plummeted 50 percent in two months. Netflix CEO Reed Hastings has apologized for failing to adequately explain his moves, and the company is trying to win customers back.

"It's the right time for Blockbuster," said Brean Murray analyst Todd Mitchell, who has a "buy" rating on Dish shares. "They are attached to Dish Network and they have distribution."

Blockbuster is gunning for unhappy Netflix customers with a free-trial offer. The company also advertises that it gets many new movie releases 28 days earlier than Netflix or Coinstar Inc's Redbox kiosks, another competitor that could benefit from Netflix's missteps.

Netflix sparked anger with a price increase as high as 60 percent, or $6 a month, for some DVD subscribers and by putting the DVD and streaming services on separate websites.

Last week, Netflix cut its subscriber forecast by 1 million, saying it now expects to have 24 million subscribers at the end of the third quarter. The last time Netflix reported a subscriber decline was the second quarter of 2007 when Blockbuster was aggressively pushing a DVD rental package called Total Access.   Continued...

<p>A sign is shown at the headquarters of Netflix in Los Gatos, California September 20, 2011. REUTERS/Robert Galbraith</p>