Online DVD rental news
Updated: 5:51 p.m. ET Dec. 22, 2004NEW YORK -
Netflix Inc will not cut its price for online DVD rentals to match lower fees set Wednesday by rival Blockbuster Inc. in an escalating battle for online subscribers, Netflix Chief Executive Reed Hastings said.
Blockbuster, the largest U.S. video rental chain, said it was cutting the subscription price for its online rental service by $2.50 to $14.99 a month plus tax effective immediately, guaranteed through January 2006.
The move came as Blockbuster grapples with growing online competition from Netflix. and giant discounter Wal-Mart Stores Inc. , and the threat that Amazon.com Inc will bring its new U.K. online service to the U.S. market.
Hastings told Reuters Blockbuster’s move shows it recognizes online rentals may make its huge network of retail stores obsolete.
“In my view, Blockbuster just killed the video store by offering $15 pricing for online, but maintaining $25 a month for store-based subscriptions,” Hastings said. “They are telling their customers to go online.”
Hastings said Netflix knew that Blockbuster was testing a lower price but believed it would have little impact on subscriber loyalty because Wal-Mart has offered a lower rate for several months.
“We have no plans to change our price,” he said. “This low price will help Blockbuster online but it may also help Netflix by converting store-based renters into online renters.”
Netflix charges $17.99 a month for online rental subscription while Wal-Mart offers a $15.54 subscription.
Blockbuster’s monthly subscription entitles customers to unlimited rentals, three movies out at a time, with no due dates, no late fees with postage included. Subscribers also receive two free in-store movie or game rentals a month.
Its competitors’ services have similar conditions.
Blockbuster said from mid-January, its online unit would have 23 distribution centers, more than doubling its capacity from August, 2004 when it launched the service.
Shares of Netflix closed down 7.14 percent, or 90 cents, at $11.70 on the Nasdaq Wednesday but rose to $11.80 in after-hours trade on the INET.
Blockbuster shares ended down 2.79 percent, or 27 cents, at $9.40 on the New York Stock Exchange but were up slightly, to $9.42 in after hours trade on the INET.
Research Associates analyst Marla Backer, who had a “sell” rating on Blockbuster stock, cautioned investors to “avoid exposure to this (rental) sector” because of the intensifying price competition.
In a note to clients, Backer said the price cut may indicate that Blockbuster underestimated Netflix’s strength as the innovator of online DVD rentals, or it may believe Amazon.com Inc , which just launched a rental service in the United Kingdom, will enter the U.S. market in 2005.
Backer also said it was unclear whether revenue lost in the price cut would be offset by savings in fulfillment costs from Blockbuster’s new distribution centers.
if this is any indication of what amazon will be offerring I don't think blockbuster or netflix have anything to be worried about.
I can't imagine that Amazon would enter the US market with the same service as they provide in the UK, unless, as you indicate, they expect to fail miserably. I'm assuming that if they come into the market, they will have to match the three DVD's at one time, unlimited for the month that is provided by the other big players. Unless they have some sort of bonus that will make up for the 4 movie limit per month.
Introducing Amazon.co.uk DVD Rental by Post
For £7.99 (~US$13) per month, members enjoy:
# 2 DVDs at home at a time
# No due dates or late fees
# 4 DVD rentals per month
# Free delivery and returns
As a rental member you'll also receive an extra 10% discount off of Amazon's already low prices on all of your DVD purchases from Amazon.co.uk!
as for netflix...i only thought about leaving them when they raised their prices to 21.99. but by the time i resolved to leave, they dropped their prices to 17.99. considering there are no blockbusters where i live, and walmart charges alaskans for shipping, i'm pretty happy with netflix. but yeah, four dvds at a time would be nice.
And lets not forget about...
Intelliflix (http://www.intelliflix.com/) ;)
It is a dollar cheaper than Netflix.
Offers a pay per rental plan, that can compliment your monthly plan.
They also have....
Games,
Adult DVD's (for a higher monthly fee)...
and...
supposedly faster service in some cities.
However....
I am sticking with Netflix....
cause I will get my DVD's faster with them for now.
There is a hub in Cleveland and it only takes em a day to get here.
Intelliflix zip code search stated it would take 2 days.
So I'm a stickin' with good ole trusty Netflix for now.
There will always be a need for physical rental stores I think.
For those times when you want to rent a movie right away, immediately and don't want to want a couple days - what you could use those 2 free rentals a month coupons for.
I am constantly getting various movies assigned for extra credit - it is easy to just go out and rent them.
Believe or not, but people are content to pay $4.99 whenver they want to rent a movie (I usually use buy 1 get 1 free or buy 2 get one free coupons)
I've only known one person who actually paid the $25 for unlimited rentals for a month in the store.
Blockbuster and Netflix are very very enticing - too bad my parents don't really approve.
I'll try to sign up with one over the summer :D
I guess the saying....
monkey see....
monkey do....
is the new thing now.
If only Netflix could have cornered the market completely like Microsoft....
they wouldn't be too pissed right now.
I'm sure they will be alright financially over the next few years for sure, it's just the fact that they were the one's who pioneered this online DVD frontier first in a successful way.
However, this is minor to the frustration of picking out movies with people in a store:
-how 'bout this one?
-seen it. What about this?
-heard it wasn't good.
-okay...how about this one?
-meh...looks dumb
-have you seen this?
-yeah
-was it good?
-yeah...get that one.
-well, I don't want you to watch it again
-no, I don't mind
-no, it's okay. I find something else
-too bad they don't have *****
-yeah
-I heard that was good
-okay, ummmm this one?
-no
-all right I give up just pick something
-what?
-I don't care...ARRH!!!
In my case they are right. A couple of bucks a month is not enough to make me change over because I never liked Blockbuster in the first place, plus I am immensely satisfied with the service Netflix has provided since I became a subscriber.
-Sandy
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January 9th, 2009, posted by mike
