Rising rates at Blockbuster good news for Netflix

DALLAS - Blockbuster Inc., which has been losing money on online movie orders, is boosting prices of its DVD-by-mail service for new customers and some existing ones by up to 40 percent.

The movie-rental giant began notifying customers of the increases — and some price cuts — early Thursday. The hikes of $2 to $10 will take effect next week and caused an immediate buzz on Internet boards.

The immediate beneficiary of the move was rival Netflix Inc. — its shares jumped more than 9 percent. Blockbuster shares barely budged.

Blockbuster declined to say how many of its 3.1 million online subscribers are facing rate increases.

Spokeswoman Karen Raskopf also declined to disclose which current customers will see price hikes other than saying, "We are taking into account the profitability of individual subscribers."

Blockbuster lost half a million online customers in the July-September quarter. Chief Executive James W. Keyes said last month that many of those subscribers were costing his company more than they were worth.

The company spent heavily to advertise the online service, and it lost money when customers took their movies back to stores for free exchanges.

While Blockbuster was losing online customers over the summer — and said it would stop reporting the number of subscribers — Netflix cut prices and added 286,000 subscribers, pushing it over the 7-million mark.