Blockbuster Inc. started selling DirecTV Inc.'s direct-broadcast satellite hardware and programming in nearly 3,000 company-owned video-rental stores last Monday.
By the end of the month, Blockbuster plans to equip 800 more of its owned stores with the retail kiosks, with additional franchised stores coming on board later this year.
To promote DBS, Blockbuster is running an exclusive consumer promotion through the end of the year that offers one free video rental per week for one year, as well as a two-year extended service plan on the new DBS hardware.
"We knew we had to answer the question for consumers on why they should buy a DirecTV system at Blockbuster rather than somewhere else," Blockbuster chief marketing officer Jim Notarnicola said.
Several months ago, Blockbuster raised eyebrows when it announced the joint marketing plan with DirecTV, which some see as a threat to the home-video market. Blockbuster gets a cut of each pay-per-view movie purchase made by DirecTV subscribers who signed up through the video-rental dealer.
"The economics of our relationship with DirecTV make us relatively indifferent to whether we rent a video or sell pay-per-view," Notarnicola said.
Still, Blockbuster hopes its free movie-rental offer will encourage repeat business at the rental stores, even among new DBS customers.
"We have millions of Blockbuster customers who have become satellite customers over the years," Notarnicola said, noting that video rentals typically drop off in the first six months after a dish is installed, then pick up again later.
"This offer gives them an incentive not only to come to us [for the initial satellite purchase], but also to come in and rent videos," he said. Even when customers devote their primary living-room viewing to the new DBS system, there are often other televisions with VCRs in the household-in children's rooms, for example.
The home-video retailer has begun promoting DirecTV in store windows and kiosks, and by putting DirecTV-branded name tags on its 15,000 DirecTV-certified sales specialists.
"Blockbuster has introduced the most thorough DirecTV training program we've seen," DirecTV Merchandising president Bill Casamo said in a press release, "and they have accomplished this complete store rollout in less than three months."
Late next month, the retailer plans to kick off a television ad campaign tying DirecTV into its "Bringing Entertainment Home" branding strategy.
The company also plans a direct-mail campaign targeted toward its 43 million customers. "Some of those customers we see quite infrequently," Notarnicola admitted. "That's our primary target. This gets them back in the store."
Notarnicola declined to make public the company's specific first-year sales goals for the DirecTV hardware.
"We have 40 million households and only a few million of those have DirecTV," he said. "I'd like to see all the rest of them buy DirecTV from us."
Blockbuster stores won't carry inventory on the DirecTV systems, but they will refer customers to DirecTV's home-services group for professional installation.
A single-receiver system will cost $199, including free professional installation and the two-year warranty. A two-receiver, two-remote-control setup, also with installation, costs $349.
For customers still on the fence about DBS, Blockbuster plans to start offering five-day rentals of a DirecTV informational video next month. Blockbuster and DirecTV jointly produced the video.