Netflix Stirs the Sleeping Giant
Events developed quickly this week with DVD-by-mail operation Netflix, a dot-com survivor that has seen stock prices quintuple since last fall on the strength of their (once unique) $20 per-month-for-unlimited-rentals offering.
First came Netflix' celebratory announcement Monday evening that they were boosting their second-quarter earnings outlook to between $3 million and $4 million from a prior loss view of $600,000. Shares jumped 6 percent to $24.50 in after-hours trading. Then Tuesday morning, Wal-Mart released news that they would change the tiered pricing on their competitive rental plan: $15.54 per month for renters who only desire two discs at a time; $18.76 for three DVD's; $21.94 for customers who want four. Netflix' stock fell back, settling at $22.70 at end of session yesterday.
Netflix has certainly been on a roll. In 2002, they doubled their sales to $153 million, and cut losses by 43 percent to $22 million. But, as notes Forbes' columnist Christopher Helman, it costs Netflix "$32 to attract a customer. Wal-Mart and Blockbuster can promote their services in their own stores, largely for free."
Moderator's Comment: Is there truly hope for Netflix and other channel innovators when category-killers are just one step behind?
Netflix has beaten the odds, so far. But their first-to-market head start is quickly dissipating. At a point in the not-too-distant future, I fear no one will remember who thought of this idea first. (By the way…are you reading this on Microsoft Explorer or that other browser…Now, what was that called?) [Rick Moss - Moderator]