to raise prices amid growing costs, competition

277 to raise prices amid growing costs, competition
Oct 18, 2011 – 10:33 AM ET | Last Updated: Oct 18, 2011 10:53 AM ET

Customers of Canada’s largest DVD rent-by-mail service will have to start paying a little more starting next month.
Rob Hall, founder of Inc. and chief executive of Corp. — the Ottawa-based movie rental firm’s parent company — informed subscribers of the coming price increase via email on Monday.

Set to take effect Nov. 1, Mr. Hall said the new cost structure was necessary because shipping costs have soared more than 25% since the company was founded in 2003. Mr. Hall said the company was also facing higher inventory fees due to the introduction of Blu-Ray discs to Zip’s selection of approximately 82,000 titles.
“We have reached a point where we can no longer offer the same quality of service at the prices we have maintained over the last seven years,” he said.
“We will never compromise on quality. For that reason, we will be raising our Mail subscription prices and making some other changes to our Mail service offerings and packages.”
Starting Nov. 1, subscribers will have to pay an extra $1 per Blu-ray disc, which will only be available on the 2-out-at-a-time plans and above. The top quality discs were previously available at no additional charge to subscribers of all plans.
Zip will also simplify its “gotta have it” charges as of next month, which allows users to pay extra to expedite the delivery of certain in-demand titles. Previously, customers paid between $2.99 and $4.99 depending on the title in question, but faster delivery will now cost a set rate of $4.99 regardless of a user’s selection.
Zip is just one of a number of firms facing increased competition from on-demand and online streaming options for the entertainment dollars of Canadians. In addition to its DVD-by-mail business, Zip is also in the process of rolling out thousands of DVD rental kiosks, similar to the RedBox brand in the United States, to grocery stores across Canada.
Zip began installing the standalone automated rental stores in Ontario and Quebec last year, and the company was expected to have nearly 800 kiosks across the country by early 2011. However, so far only 60 Zip Kiosks exist today, according to Toronto-based Convergence Consulting Group Ltd. also does not currently offer an Internet-based instant viewing option to compete against Netflix Inc.’s online streaming service, despite long-held plans for such an offering.
Convergence expects streaming to be delayed for at least another year. Meanwhile, the service has been facing mounting competitive pressure from Netflix since the Los Gatos, Calif.-based online streaming juggernaut brought its Web-only, $8 per month unlimited offering to Canada last September.
Netflix has amassed more than one million Canadian customers barely 12 months later, while Convergence estimates only about 75,000 people subscribed to Zip packages — which range from $6 to $50 per — as of the end of 2010.
While that represents impressive 50% year-over-year growth from the 50,000 estimated subscribers to Zip services at the end of 2009, Mr. Hall is now left with the unenviable task of convincing them to remain with the otherwise positively reviewed service in the face of higher fees.
“Your continued enjoyment of our service is important to me and I assure you that these changes will allow us to improve the quality of your experience with us,” said Mr. Hall.
Media Mayor Inc.
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