Flaws in Blockbuster's Revival

Blockbuster's plan to knock off competitor Netflix seems to be working. The game is over.

Or is it?

Blockbuster's stock closed Monday at $7.14, up more than 85% since late October. That's not bad at all for a company that only a year or so looked like wide-eyed roadkill with a Mack truck bearing a Netflix logo headed straight for it.

At its darkest hour, Blockbuster turned the tables admirably, launching Total Access. The program aimed straight at Netflix' weakness: Blockbuster subscribers who rented a DVD through the mail could return it to a bricks-and-mortar store and get a free DVD there while the next DVD in their online queue was popped into the U.S. mail.

The strategy played on Netflix's tendency to "throttle" DVDs -- that is, find some excuse to delay shipping a DVD to a hyper-loyal customer addicted to DVDs. Throttling, which helps hold up Netflix's bottom line, does a mean thing to addicts: It denies them their addiction.

But with Total Access, a movie-lover jonesing for a new DVD could drive down to a Blockbuster store and get a quick fix.

It was a brilliant move. Investors loved it so much they kept driving up Blockbuster's stock, despite a couple of quarters of earnings depressed by higher marketing and other costs needed to get the program off the ground.