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Walmart bows to Netflix's Superiority

 
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TheAngryJew
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PostPosted: Fri May 20, 2005 3:31 pm    Post subject: Walmart bows to Netflix's Superiority Reply with quote

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Wal-Mart Stores, the world's largest retailer, said today that it would no longer offer online DVD rentals and would instead direct its customers to Netflix, a startup company whose business model it copied.

Netflix, based in Los Gatos, Calif., began offering DVD rentals by mail in 1999 but has recently been threatened by nearly identical offerings from Wal-Mart and another much larger rival, Blockbuster, the movie rental chain. Although the competition remains cutthroat, with Amazon.com expected to announce its entry soon, Wal-Mart's withdrawal from the market provides Netflix with a measure of relief.

For Wal-Mart, the Netflix deal represents a rare concession: it surrenders its foothold in an increasingly lucrative, if competitive, market.

"Wal-Mart seems to have assigned its shot at leadership in this category to Netflix," said Dan Hess, senior vice president of comScore Networks, a market research firm.

The venture was a minor one for the gigantic retailer, Mr. Hess said, but "it's always noteworthy when a powerhouse like Wal-Mart takes a step back from a strategy."

John Fleming, Wal-Mart's chief marketing officer, described Netflix in a statement as "the pioneer of online movie rentals" and said Wal-Mart was choosing to build on "tremendous growth in our online movie sales."

Still, the company, based in Bentonville, Ark., has shown signs of struggle. Last week, it reported that its first-quarter earning rose 9.5 percent, the slowest pace in more than two years.. Wal-Mart's shares were little changed today, slipping 7 cents to close at $47.51 on the New York Stock Exchange. Shares of Netflix gained 63 cents, or 4.1 percent, to $16.13 in Nasdaq trading today, but the stock is still well below its all-time high of $39.77, hit in January 2004.

Reed Hastings, Netflix's co-founder and chief executive, said in a statement that the deal with Wal-Mart would bolster both companies' businesses "while providing customers even more choices and convenience."

The companies agreed that Netflix would promote Wal-Mart's online movie store to its three million subscribers, both on its Web site and through flyers enclosed with its DVD's, while Wal-Mart would promote Netflix's service.

For $17.99 a month, Netflix's customers rent up to three DVD's at a time, choosing from about 40,000 titles. They receive new movies by returning any of the ones they borrowed, or they can hold onto the rentals as long as they want. That flexibility has been credited with pushing Blockbuster to do away with its late fees a few months ago.

Current subscribers to Wal-Mart's DVD rental service, which began in June 2003, can join Netflix at their old rate, typically $12.97 a month to rent two movies at a time. Those who fail to transfer their membership by June 17 will lose the service. Wal-Mart did not disclose how many subscribers it has.

Netflix predicted only moderate benefit from the deal with Wal-Mart, saying it still expected to lose $5 million to $15 million this year as it competes with newer services like Blockbuster's. Amazon.com, which began offering online DVD rentals in Britain last year, has not said whether it plans to start distributing DVD's in the United States, although analysts have predicted its entry.

Blockbuster, based in Dallas, responded to its rivals' agreement this afternoon by offering two free months of service and a free DVD to customers who switch from Wal-Mart or Netflix's rental service. The company will also match either competitor's subscription price, "to continue to compete very aggressively in this space," John Antioco, Blockbuster's chief executive, said in a statement.

Blockbuster began offering online DVD rentals last year and is so far charging $14.99 a month for the service, plus two in-store rentals.


Source: New York Times
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PostPosted: Fri May 20, 2005 5:06 pm    Post subject: Reply with quote

Woohoo!!! Stick it to the man!
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lindy03



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PostPosted: Fri May 20, 2005 5:48 pm    Post subject: Reply with quote

I love Netflix.

I hate Blockbuster.
I hate Walmart & will never shop there again.

Netflix rules. I hope they don't send me any fliers. If they do, I shall throw them away.
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Oz
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PostPosted: Sun May 22, 2005 9:13 pm    Post subject: Reply with quote

The anti-Wal*Mart brigade (of which I'm a card-carrying member) are hating this move, calling Netflix out for being in league with the devil. Personally, I love that Netflix drove Wal*Mart out of their business entirely, and all for the cost of a "buy this title from Wal*Mart" link.

Now, WM competitors in every other industry shoud take note and hurt Wal*Mart accordingly in every sector by beating them on selection, service and outside-the-box thinking.
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