Price Cuts Killed The Video Store

Discussion
Dec 23, 2004
George Anderson

By George Anderson


Blockbuster just cut the monthly fee for its online video rental service and one competitor thinks that is one of the best presents he and his company could have ever received.


Reed Hastings, chief executive of Netflix, said, “Blockbuster just killed the video store. With $15-to-$18 pricing … stores are going to be empty in 2005.”


Whether Mr. Hastings prediction turns out to be true, only time will tell, but the latest move by Blockbuster signals the chain is serious about grabbing as much share of the online rental market as it can. Users of the service will now be able to have three movies out at any given time for a fee of $14.99 a month. The previous price charged by the chain for the same service was $17.49.


Wal-Mart, the other large player in the U.S. rental market, charges $15.54 for a similar plan it offers.


Amy Colella, a Wal-Mart spokesperson, did not say if the retailer would follow suit but she did tell The Associated Press the company was “reviewing the changing competitive landscape.”


Mr. Hastings said Netflix has no plans to drop its price from the current $17.99 a month subscription fee.


Moderator’s Comment: What impact will Blockbuster’s latest price cut have on both the online and in-store video rental
market?

George Anderson – Moderator

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