Netflix
Though the 'No Late Fees' policy does hold true, there is a 're-stocking
fee' and, if you do not return the video in an ample amount of time, you
have to buy the whole damn thing. What!
Not to jump too hard on Blockbuster, but it seems that they are now losing
the online video rental battle as well; something that they are growing
to rely on. What is wrong with Blockbuster online program? Nothing. But,
a competitor who we once thought was waiting for the last nail in the coffin,
Netflix, is rebounding like you couldn't believe.
Blockbuster vs Netflix
According to Variety, third-quarter earnings reported
Wednesday showed Netco is continuing to boom, surging ahead of its nearest
competitor on the Net and directly challenging those in the non-virtual
world as well.
When Blockbuster first announced that they were going to join the market
of online video rentals, we had figured that Netflix just woke a sleeping
giant with a very 'unfair' advantage. Netflix felt it too, with returns
quickly dropping and a stock value that plummeted to just around $10 before
2004 closed out. As mentioned earlier, we had figured that either Netflix
was going to have to find a niche in the video-rental market or just raise
the white flag.
What we didn't expect is that they would come out swinging in 2005 by dropping
prices to directly compete with Blockbuster. Because of this move, Netflix
subscribers went up, as so did the stock. But it doesn't stop their Netflix
is looking at supreme growth over the next decade to create a crushing blow
back on Blockbuster.
Last quarter, Netflix grew by 396,000 subs, more than doubling net adds
from a year ago and bringing its total to 3.6 million, well ahead of guidance.
Netco also upped its predicted total for the end of the year from 3.85 million-4.05
million to 4 million-4.2 million.
The only problem with Netflix lowering its prices meant lowering its profits
[at least for the short run]. Due to the price decrease, profits remained
small, totaling just $6.9 million, down significantly from $18.9 million
a year ago when its price was $4 higher and sub total was 2.2 million.
Now that it looks like Netflix has achieved the
upper hand, one would think that they would stabilize prices or even increase
them a notch. However, rather than taking the opportunity to raise prices
and focus on profits, Netflix is looking to place even more pressure on
competition such as Blockbuster. So, instead of raising prices, CEO Reed
Hastings said that the company will test further price cuts over the next
six months to see if it can accelerate growth further without sacrificing
margins.
In response, Blockbuster delayed its goal of reaching 2 million subscribers,
as it also faces heavy losses from its "No Late Fees" promotion.
Though this fact should have been a no-brainer, Blockbuster has now been
forced to close money-losing stores.
Is there any hope for Blockbuster? Sure, but one of the largest hopes coming
our way next year will help Netflix as well; therefore making it more critical
to be in a strong position by the time 2005 closes out. With the arrival
of the high-definition 'Blue-Ray' DVDs, both companies, and Hollywood for
that matter, are looking forward to increased profits with a renewed market
on this new technology. To learn more about 'Blue-Ray' DVDs and the high-def
DVD battle, click here.
Though Netflix is definitely on the up, I am still one of those that use
Blockbuster's online rental system. Why? Mainly one reason: they allow two
in-store rentals a month with the subscription, meaning you don't have to
wait the three days all the time.
Stay tuned for updates.
|
Add to Heffee!
