NationsBank and Blockbuster Entertainment are ending one of the credit card industry's most heralded cobranding partnerships.
The Charlotte, N.C., bank began informing Blockbuster cardholders this month that the two-year-old Visa program will be discontinued Aug. 31.
Officials at both NationsBank Corp. and Blockbuster, a subsidiary of Viacom Inc., said the decision was mutual.
It is the latest in a series of pullbacks from a strategy that has fueled much of the card industry's growth in the 1990s. Desires to move in new marketing directions or find lower-cost ways of retaining customers have caused deals to come apart in recent months between Citicorp and Ford Motor Co., First Bank System (now U.S. Bancorp) and Target Stores, and Mercantile Bancorp. and SBC Communications.
Several other programs have become less generous with cardholder benefits.
Few began with the fanfare of the Hollywood-style premiere staged by NationsBank, Blockbuster, and Visa in March 1995. Television commercials aired for months thereafter featuring supermodel Cindy Crawford, and promotional posters and applications could be found in 4,000 Blockbuster Video outlets.
Such mass-media launches usually do well, said Frances M. Dale, president of Entandem, a consulting firm in Sterling, Va. The General Motors and Shell Oil cards, issued by Household Credit Services and Chase Manhattan Bank, respectively, made big splashes early, she said.
But Ms. Dale said Blockbuster did not continue building on the initial advertising blitz.
"The Blockbuster card was good, simple, well priced, and focused in terms of its benefits," said James L. Accomando, president of Accomando Consulting Inc. in Fairfield Conn. "Everybody rents videos, and Blockbuster pretty much owns that segment of the industry."
But if a program is popular and consumers redeem their reward points at a high rate, the costs for the partners can rise to unexpected heights-a reason given for many of the recent pullbacks.
In April, NationsBank tried to boost revenue by charging a $20 annual fee to those Blockbuster cardholders who paid their balances in full each month. The policy affected 6% of the portfolio.
The companies did not disclose their number of cardholders. Blockbuster said only that the program reached fewer than 1% of its 65 million customers.
Until Aug. 31, cardholders will still get rebates of 5% on all purchases at Blockbuster Video, Blockbuster Music, Discovery Funcenters, and Paramount parks. The rebates will be redeemable for up to one year from the date each credit card was issued.
"Rebates need to stimulate loyalty and provide both partners with profitable transactions," said Frank Caruana, director of marketing systems for Danielian Consulting Group in Scottsdale, Ariz. Profitability can wane "if you don't have a strong degree of revolving" of credit balances, Mr. Caruana said.
Jamie Pickrell, a spokeswoman for NationsBank, said the program was successful in a number of measures, but she would not be more specific.
Jonathan Baskin, senior vice president of Blockbuster in Dallas, agreed the program was not a disappointment, but he said it benefited a small percentage of members.
"We have chosen to refocus our resources, people, time, and energy to developing benefits that will be available to all of our members, not just those who choose to participate in a credit card program," said Mr. Baskin.
Ford used similar reasoning in not renewing its Citibank relationship.
Mr. Caruana said Blockbuster has had problems sustaining growth and is struggling with issues of customer loyalty and brand strength.