Netflix Gets New Competition: Wal-Mart

Oct 16, 2002

By George Anderson

If imitation is the sincerest form of flattery, then the online DVD rental subscription service, Netflix, must be doing something right.

First, Blockbuster Entertainment announced it was testing a monthly subscription fee for DVD rentals from its stores. Now, Wal-Mart is testing its own online DVD rental service for a monthly fee.

The new Wal-Mart service allows customers to rent up to three DVD titles at a time for a monthly subscription price of $18.86. Netflix offers a number of subscription tiers from its Standard package (three movies out at a time) for $19.95 a month to its Ultimate package (eight movies out at a time) for $39.95 a month. Both the Wal-Mart and Netflix subscription fees include postage.

Moderator’s Comment: What affect will Wal-Mart’s entry
into DVD rentals have on the retail competition and the studios that produce
and distribute the movies?

If we were the movie studios, we’d be pulling for Netflix
to hang tough. With Wal-Mart in the business, the negotiations are bound to
get rough. Having formidable competitors to Wal-Mart will be about the only
leverage the studios have in dealing with the folks in Bentonville.

Netflix has a head start on Wal-Mart but we wouldn’t want
to bet against the company that Sam made if the competition comes down to a
price war. Wal-Mart is offering a free 30-day trial of its service. It would
be interesting to see how many Netflix subscribers take Wal-Mart for a test
drive. We know of one. [George
Anderson – Moderator

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