Sept. 23 (Bloomberg) -- Dish Network Corp. is starting a Blockbuster-branded subscription online movie-rental service to challenge Netflix Inc. for customers who buy streaming video.
The Blockbuster Movie Pass service is initially available only to Dish’s satellite-TV subscribers for $10 a month and will include renting DVDs and video games by mail, Dish executives said today at an event in San Francisco. New customers of Dish’s $39.99-a-month pay-TV service will get the Blockbuster service free for a year.
Dish, which bought most of Blockbuster’s assets in April for $320 million, announced its service as Netflix’s 60 percent price increase for customers who rent DVDs and stream videos goes into effect. Dish, based in Englewood, Colorado, purchased Blockbuster to tap into the growing online video market and steal some of Netflix’s 25 million customers.
“We think we’ve built a better mousetrap and can embrace all consumer video needs,” said Dish Chief Executive Officer Joseph Clayton in an interview.
Dish is planning to offer the Blockbuster service to anyone in the U.S., including non-Dish subscribers, by the end of the year, said Clayton.
Netflix began charging $15.98 this month for customers who want to rent DVDs and stream videos. Streaming only is $7.99 a month. Earlier this week, Netflix Chief Executive Officer Reed Hastings announced the company will separate its DVD business and rename it Qwikster. Blockbuster’s site will allow customers to buy streaming videos and rent DVDs from the same website.
Blockbuster will not separate its DVD-by-mail business from its streaming business, said Clayton.
“We were surprised by Netflix’s decision, and I sure like our Blockbuster brand compared to the new company from Netflix,” he said.
Netflix shares have tumbled since the Los Gatos, California-based company cut its U.S. subscriber forecast on Sept. 15, in part because of the price increase. Since then, the shares had fallen 24 percent.
Blockbuster Movie Pass begins Oct. 1 and offers more than 4,000 movies streamed to personal computers. When put together with Dish’s current television offerings, Dish will give satellite-TV customers more than 130,000 titles. Blockbuster’s current streaming service already allows customers to watch movies for a one-time transaction fee. Netflix offers 100,000 movies and more than 31,000 streaming titles, according to Dish.
Netflix does not release specific figures and streams “well above 20,000” titles, spokesman Steve Swasey, said in an interview.
“Netflix is still unbeatable value,” said Swasey.
“You’ve got to be a Dish subscriber to get this deal, and that’s at least $40 a month.”
The Blockbuster service will include movie rights from Liberty Media Corp.’s Starz LLC, which decided not to renew its contract talks with Netflix earlier this month. Movie Pass subscribers will not need to sign up for premium channels included in the service, such as Starz and Epix.
Clayton said Dish was still looking at acquiring Hulu LLC and said he would consider buying or partnering with a wireless company to take advantage of its recent acquisitions of spectrum. When asked if a partnership or takeover could be for Sprint Nextel Corp. or Clearwire Corp., Clayton said, “could be.”
Dish rose $1.36, or 5.4 percent, to $26.76 at 4 p.m. New York time on the Nasdaq Stock Market. Netflix gained 83 cents to $129.36.
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