THE MORNING BUZZ: Bigger Fish Hope to Fry Netflix17 Oct, 2002 By: Thomas K. Arnold
The problem with having a good idea is that invariably someone will steal it.
And when the someone who steals your idea also has a lot more money than you do, and is thus in a position to take the proverbial ball and (proverbially, again) run with it, you might just find yourself in deep do-do.
That's the position Netflix, the pioneering online DVD rental house, is finding itself in with word that Wal-Mart, the mightiest retailer in the world, has entered the lucrative subscription rental market with a model that's eerily similar to Netflix's.
Netflix charges $19.95 a month and lets subscribers check out up to three movies at any one time. No deadlines, no late fees — just send it back when you're done and they'll send you another one.
Wal-Mart charges $18.86 a month and lets subscribers check out up to three movies at any one time. No deadlines, no late fees — just send it back when you're done and they'll send you another one.
Wal-Mart is still in the test phase, saying it wants to fine tune the concept with a limited number of customers before offering it to everyone next year.
But with the chain's famous resolve and a base of more than 2,800 physical stores that smart money says will somehow get involved in this venture, Wal-Mart could be a formidable spoiler in what has thus far been Netflix's game alone.
It is interesting to speculate where a predatory chain such as Wal-Mart will strike next. My hunch: Look for this “subscription model” to take root in physical Wal-Mart stores in an attempt to launch a full-on assault against — yes, you heard it here first — Blockbuster.
It makes sense. Wal-Mart has already said its most profitable stores are its supercenters that sell just about everything, including groceries. And as more and more regular Wal-Marts (and Sam's Clubs) are converted to supercenters, it only makes sense that video rental will be part of the mix, since Wal-Mart will then have the in-and-out daily traffic that supermarkets have—and that made grocers a key player in video rental before the copy-depth morass soured them on the whole concept.
With DVD, there is no copy-depth — just one low price. I predict we'll see a big surge in grocers returning to video rental, and Wal-Mart will be among them.