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Wal-Mart Eyes Online Rentals

3 Oct, 2002 By: Joan Villa

Wal-Mart may soon plunge into an online-based DVD rental service similar to NetFlix's flat-fee subscription model. The Wal-Mart plan, however, would undercut NetFlix's $19.95 monthly fee by $1.09, but still allow subscribers to keep out three DVDs at a time, according to documents obtained by the Associated Press.

Wal-Mart declined to confirm the company's plans. “At any given time we are always evaluating new products and services,” spokeswoman Cynthia Lin told VSM, adding that the idea has not been “finalized.” Video industry sources, however, believe the service could launch as early as Christmas.

NetFlix says it welcomes the competition. “They're the largest retailer in the world so they bring instant credibility to the space overnight and the fact is, they'll also bring attention to the whole notion of online rental,” asserted Ted Sarandos, VP of content acquisition. “We spend most of our marketing dollars explaining what we do so they'll be helping in that initiative.”

However, two-way delivery “is a totally different skill set,” he added. “That's why Amazon doesn't do it and that's why we don't want to get into sales.”

Video analyst Dennis McAlpine questions whether a retail giant such as Wal-Mart can successfully tackle rental. NetFlix's growth has not been entirely trouble-free – there were problems when it expanded delivery from one distribution center to 10 earlier this year, he said -- but with 670,000 subscribers, the service is expecting 2002 revenues close to $160 million.

Industry sources, however, say Wal-Mart has a reputation for succeeding at its endeavors. The retailer already has at least one studio revenue-sharing deal in place for the DVD service, noted one executive.

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