Thursday, May 19, 2005

Wal-Mart out of DVD Rentals, Netflix still in

Wal-Mart announced it would terminate it's online DVD rental service and provide it's customers the option of converting their subscription to Netflix at their current rate for a year. In return, Netflix will promote Wal-Mart's DVD sales online through their website. Wal-Mart will direct customers to Netflix via their own website.

Blockbuster retaliated by raising their rental price to $18 as a test, which is a pretty wierd thing to do when you are an underdog. This tie-up of Netflix and Wal-Mart effectively puts an end to the earlier rumors of Amazon teaming up with Netflix for DVD rentals, and could pose a huge opportunity for Blockbuster.

Netflix, with its new $9.99 one-at-a-time DVD plan, and formidable library of titles is a tough competitor. I have been a subscriber for a long time, and although I did sample the other services' free offers, would not dream of cancelling my Netflix subscription. Netflix now has about 3 million subscribers.

If you visit the Netflix site, you can already see a banner ad for Wal-Mart stretching across the top of the page. Wal-Mart features the reverse feed back to Netflix.

This is one of the few times where an under-dog has taken on a behemoth like Wal-Mart, and won. Then again, this is a new game, and the rules are different.

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