Blockbuster reaches 2 million online users

LOS ANGELES (Reuters) - Movie rental company Blockbuster Inc. said on Wednesday that it reached a year-end goal of 2 million online subscribers, sending its shares up more than 6 percent.

Actress Jessica Simpson (R) is introduced by Blockbuster Chairman and CEO John Antioco at the launch of the Total Access program in Hollywood, California November 2, 2006. Movie rental company Blockbuster Inc. said on Wednesday that it ended 2006 with around 2.2 million online rental subscribers, including about 2 million paying subscribers. REUTERS/Mario Anzuoni

Blockbuster said it added more than 500,000 subscribers since the end of the third quarter.

Blockbuster faces growing competition from online movie renter Netflix Inc., which had forecast that the number of subscribers would exceed 6 million by year’s end.

“These numbers are pretty surprising. Blockbuster not only made the numbers they guided to, but exceeded them and did it in a pretty dramatic fashion,” said Wedbush Morgan Securities analyst Michael Pachter, citing the quarterly subscriber numbers.

Blockbuster Chairman and Chief Executive John Antioco credited its Total Access plan, which gives online customers the option of returning DVDs through the mail or exchanging them at stores for free rentals.

Pachter said he believed Blockbuster’s strategy could expand the market. “I think Blockbuster is demonstrating to its brick and mortar customers that the option of being able to order by mail is worth something. It’s converting some people who would not necessarily have ordered online,” he said.

In addition to Total Access, Blockbuster last month offered free in-store rentals to Netflix subscribers. They got one free rental at Blockbuster for each address label from their Netflix mailing, a deal that was valid until December 21.

Both Blockbuster and Netflix have spent hundreds of millions of dollars over the past few years trying to reach the growing online DVD rental market, which they believe numbers more than 20 million potential subscribers, as the in-store rental business contracts.

Blockbuster has more than 8,000 stores worldwide. Netflix, on the other hand, says it can reach most of its subscribers with one-business-day mail delivery.

Blockbuster stock rose 34 cents to $5.63 on the New York Stock Exchange, while Netflix added 39 cents, or 1.5 percent to $26.25 on Nasdaq.