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Amazon Launches Rentals by Mail in U.K. With a Twist

9 Dec, 2004 By: Holly J. Wagner

Amazon.com has launched its DVD-by-mail rental service in the United Kingdom with a special twist. Its new service offers a two-out, four-rental maximum monthly plan for £7.99 and a three-out, six rental maximum monthly plan for £9.99, both including a 10 percent discount on DVDs purchased from Amazon. Competitors' subscription plans in the market offer unlimited monthly rentals.

“Amazon is determined to be the best place to rent DVDs, online or off,” said Amazon.com founder and CEO Jeff Bezos. “We're excited to launch today in the U.K. with a high-quality, low-priced DVD rental service. As an additional benefit, our rental members will get an extra 10 percent off when they choose to buy from Amazon.co.uk's selection of tens of thousands of DVDs.”

Observers have been waiting for Amazon to enter the online rental market since Netflix CEO Reed Hastings announced in October that Netflix would cut its U.S. subscription rate to $17.99 a month and delay its planned entry into the U.K. market.

Blockbuster has been operating an online rental program in the U.K. since October 2002. Blockbuster offers a la carte rentals by mail as well as subscriptions priced at £13.99 for a three-out, unlimited rental plan. A la carte rentals are £$4.50 for new releases and $3.50 for catalog titles.

U.K.-based competitors like ScreenSelect offer a three-out, unlimited rental program for £14.99 a month. ScreenSelect merged with Video Island earlier this year as a bulwark against Blockbuster, Netflix and other potential competitors.

“If you look at the 6.5 to 7 turns (per customer, per month) that they have, if they are putting a six limit on it, they are cutting it down substantially,” said Dennis McAlpine of McAlpine & Associates.

“One of the reasons that Netflix said they backed off the U.K. market was that they could not have a geographic advantage in that market, meaning one-day delivery is nothing special because everyone there does it. Amazon cannot compete on that basis, so they have to have something else,” he said. But he was skeptical about how well consumers will embrace a subscription that caps the number of rentals per month.

“They have made it complicated now,” he said. “I have never seen a place where that works very well. Trading cost for complexity muddies up the water too much.”

An Amazon spokesperson would give no clue as to when or if the company might launch a similar service in the United States.

“We don't have anything to announce with regard to the U.S. at this time,” she said. “However, our customers have been asking us for the service, and we believe we're well-positioned to offer a great customer experience. Stay tuned!”Netflix and Blockbuster did not immediately respond to requests for a comment.

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