As we reported last month, Netflix founder and CEO Reed Hastings had promised to cut prices to ensure future growth, despite competition from Blockbuster, Wal-Mart Stores and soon Amazon. True to his word, today Netflix announced unlimited rentals for the new price of $17.99 a month. The only limitation being possession of 3 DVD's at a time. Prior to this, Netflix charged $21.99 per month for the same service.
Rental demand has been waning amid the increasing proliferation of cheap DVDs at retail stores and a shift by some consumers to watch movies via video-on-demand or pay-per-view services. To take Netflix head-on, Blockbuster on Oct. 15 cut its online rental price to $17.49 from $19.99, fueling concerns about a price war that could strangle profit growth as competition escalates. |
With the huge selection of titles offered by Netflix,
this is a great deal for consumers. But, how long can the online rental stores keep this up? Even with the old joke of making money on a slim margin, all it takes is volume, we have to wonder. With this large of a percentage cut, with no due dates, no late fees and no shipping charges, can this allow for a margin at all. What do you think? Can Netflix and Blockbuster still be profitable with their present pricing scheme?
Source: C|Net
