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Technology Stocks : Netflix (NFLX) and the Streaming Wars -- Ignore unavailable to you. Want to Upgrade?

To: pass pass who wrote (34)	6/15/2003 8:46:28 PM
From: Glenn Petersen	Respond to of 2280

I won't speak to the current valuation, but I do expect Netflix to survive. This strikes me as an unusual niche for Walmart. FWIW, I am neither long nor short this stock. washingtonpost.com Wal-Mart Follows The Netflix Model By Leslie Walker Sunday, June 15, 2003; Page F07 It's official: Wal-Mart is going after Netflix. The nation's largest retailer has decided after a seven-month trial that it wants a piece of the movies-by-mail business pioneered by Netflix. As you might expect, the discount king is using price as a weapon. Wal-Mart announced new rates last week for its copycat DVD-rental service: $18.76 a month to check out three DVDs at a time, and $15.54 to rent two titles at once. When Wal-Mart started its rental pilot in October, it charged $18.86 for two flicks. Netflix's standard rate is $19.95 to keep three movies at once. It reports that more than 90 percent of subscribers stick with that pricing option. Both services ship DVDs to customers along with prepaid return envelopes. Consumers keep a running list of titles they want on the Internet, and a new title is mailed whenever they return one. Rentals are mostly unlimited, restricted only by how fast you can watch and return them. But a lot of people don't watch enough movies to justify a $20-a-month tab. Wal-Mart's $15.54 rate seems a shrewd move to siphon away Netflix's price-conscious members, especially those who watch only one or two flicks a week. Under the two-title plan, they can keep one and have another in the mail at all times. Wal-Mart's DVD rental manager, Matt Sevick, said that interviews with "a ton of focus-group customers" showed "a significant number of people" wanted a lower price offering. Netflix also offers a cheaper plan-$13.95 a month-for renting two titles at once, but it caps total rentals under that plan at four per month. None of Wal-Mart's plans has an overall cap. Movie hogs may also be keen on Wal-Mart's new top rate of $22 a month, which offers four titles at once. By contrast, Netflix offers five titles for $30 and eight for $40. Netflix spokeswoman Lynn Brinton dismissed Wal-Mart as an also-ran in the DVD rental market: "We feel strongly that they have never really been a threat to us and won't be until they get some critical mass in their subscriber base." Five-year-old Netflix of Los Gatos, Calif., has more than 1 million subscribers, offers 15,000 titles and ships from 20 distribution centers. Wal-Mart has released no subscriber tallies but is believed to have well under 50,000. The giant retailer offers 13,000 titles, ships from six centers and is plotting a big in-store marketing campaign. It's worth noting that Wal-Mart, even with its vast network of stores, has rejected the in-store movie rental model being offered by Blockbuster. The video-store chain has belittled the mail-order DVD model and instead offers DVD subscriptions that require consumers to pick the disks up and return them at stores. www.walmart.com www.netflix.com