When Netflix announced a few weeks back that it was hiking prices on its movie rentals, the competition was like sharks in the water sensing blood.
To no one’s major surprise, super-retailer Walmart went public on Tuesday that it would now offer streaming video for sale or rental on its Web site. Should we believe this to be a coincidence given the Netflix announcement recently or a well-timed marketing ploy?
The Walmart Playbook
Having purchased video-on-demand service VUDU a year ago, Walmart will rely on its wholly-owned subsidiary to service customers.
According to a release from VUDU General Manager Edward Lichty, “This integration allows us to introduce more Walmart.com customers to digital entertainment and give them access to thousands of new release and popular movie titles immediately through VUDU’s high-quality streaming service. We’re enabling customers to easily choose how they want to enjoy their entertainment content – whether that be through a physical DVD, digital streaming or both.”
Walmart, which reportedly serves more than 200 million customers in over 9,000 stores each week, points out that users shopping online for DVDs and Blu-ray discs now have the option of purchasing or renting digital copies of titles that are available as part of the VUDU streaming library.
Once acquired, the movies are then accessible either via the Walmart Web site, VUDU.com or on any of the 300-plus connected devices that the VUDU streaming service is available on. One major difference with Netflix is that users do not subscribe to VUDU.
Walmart is making movie watchers part of the process, offering a daily 99-cent “Movie of the Day” rental, allowing users to vote for the film that will be available each Friday on its Facebook page.
So, should Netflix be concerned?
Well, that depends on whether or not it survives its price hike, along with the matter of whether customers prove to be loyal or bolt for the cheapest provider available.
To most observers, Netflix, which reportedly has around 24 million subscribers just in the U.S., raised its prices to cover increasing costs.
Under the new arrangement, Netflix will charge $7.99 per month for accessing its streaming video service and a separate charge for DVD rentals by mail ($7.99 for one DVD out at a time, $11.99 for two out at a time, etc.) The monthly fee for streaming plus one DVD will increase to $15.98, from its prior level of $9.99. For new members, the changes are effective immediately; for current members, the new pricing begins for charges on or after Sept. 1.
Netflix Killed Blockbuster and Hollywood Video
Another thing to keep in mind here is Netflix pretty much put Blockbuster and Hollywood Video out of business, so it does have a product that movie watchers went for and will likely continue to go for, minus those who decide the rate increase is too much to stomach. It also turns out Hollywood releases rather quickly, yet another thing in its favor.
When you crunch the numbers, remember when you used to run out several times a month to Blockbuster and buy movies at $4 and change? Paying around $16 a month for unlimited access with Netflix is really not that outrageous.
That being said, you can bet Netflix suits will be watching the numbers and trends that come out of Walmart’s latest move, along with what companies like Amazon, Apple and Google are up to, all businesses that want a piece of the large movie watching audience.
For now, I think Netflix will weather the price increase storm, especially given the fact that I and many others probably don’t automatically have Walmart pop into our heads when thinking movie rentals.
For business owners, watching this fight play out between these well-known companies should be both entertaining and hopefully educational.
As they point out in business, learn from others mistakes and don’t repeat them.
The question now is will it be a mistake of raising prices or getting into an arena where you’re not the top dog?
Photo credit: gizmodo.com