By George Anderson
A price war has broken out in the online DVD rental business and the winner, at least in the short term, are consumers who get to keep a few extra dollars in their pockets.
Recently, Netflix announced it was dropping its monthly subscription price allowing consumers to have three DVDs out at a time by $4 to $17.99. Initially, the speculation was the company had decided to make this move based on rumors that Amazon.com had planned to get into the rental business.
While Amazon has yet to enter the market, both Blockbuster and Wal-Mart responded to Netflix's decision to lower its monthly fee by dropping their own subscription rates.
Walmart.com, as might be expected, offers the lowest monthly rate to have three DVDs out. The online arm of Wal-Mart Stores now charges customers $17.36 for the service.
Blockbuster, the largest movie rental chain in the U.S., dropped its monthly offer to 50 cents below Netflix at $17.49.
Moderator's Comment: What will the impact of this price war be on the retailers involved, consumers and the online DVD rental business as a whole?
Last year, DVD subscription programs such as those offered by Netflix and Walmart.com generated roughly $300 million in sales. Blockbuster began offering its service this year.
Prior to all the price cutting, some saw the business growing to as much as $2 billion over the next three years. We don't expect lower prices to bring in enough new renters to grow the market anywhere near that.
Something or someone is going to have to give. - George Anderson - Moderator