Netflix takes over Wal-Mart DVD rental business

Well, it looks like Wal-Mart's master plan to bankrupt Netflix didn't quite turn out — the world's largest retailer is now essentially surrenduring to the much smaller internet startup and turning over their DVD rental business. The agreement specifies that Wal-Mart will offer its existing online rental customers the chance to continue their subscriptions under Netflix at their current price for the next year, and begin promoting the Netflix service in its website. In turn, Netflix will remind its customers that they can purchase DVDs from Walmart.com — awww, isn't that nice? Of course, Netflix still has Blockbuster to contend with, but it's a major victory to have at least knocked Wal-Mart out of the running.

[n8 @ Dec 19th 2005 1:21AM]

Yay for the little guy!

[Jeff @ Dec 19th 2005 1:21AM]

Great news for Netflix. And proof that a good service *can* win out over a massive corporate behemoth.

Competition is good, but I'm glad to have Wal-Mart out of the picture on this. It evens up the playing field a little bit; competition doesn't really work when the company with the best service is like 1 billionth the size of the companies its competing against.

[Jeff O'Hara @ Dec 19th 2005 1:21AM]

Love Netflix, Love the service, My parents have blockbuster and they are getting ready to switch to Netflix because blockbusters service sucks.

-jeff
http://blog.zemote.com

[Matt Baron @ Dec 19th 2005 1:21AM]

I suspect that blockbuster will go the same way within a year.

[Asher @ Dec 19th 2005 1:21AM]

Blockbuster has horrid turn around times. Up to a week once they receive your movie to send another back out. It is nearly, if not completely, impossible to rent 3 movies in a week. It's in the cards that Blockbuster will go soon as well. Good job Netflix!

[Homer J @ Dec 19th 2005 1:21AM]

I really dont understand blockbuster right now.

I read that Hollywood Video is interested in buying them, and some other share holders are interested in closing the online / mail business.

Does anyone understand the "brick & morter" video rental model is dead. Also, so is mail order once broadband had sufficient throughput for on demand programming.

[Galley @ Dec 19th 2005 1:21AM]

Death to Wal-Mart!

[atomopawn @ Dec 19th 2005 1:21AM]

Of course, once the competition is dead, Netflix's customer service will probably degrade down to the level of Blockbuster, anyway. That almost always happens in these kinds of things.

[Jay-B @ Dec 19th 2005 1:21AM]

Now if only TiVo could do the same with Time Warner. Though it's deal with Comcast is rather nice it would be great if this "Netflix/Walmart" rule would apply to all industries.

[Kevin Parrott @ Dec 19th 2005 1:21AM]

Maybe Netflix can actually add some titles to their library now instead of ignoring repeated requests. Blockbuster had many titles I couldn't find on Netflix, so I cancelled Netflix and went with them. Also, Blockbuster gives you two free rental coupons per month for movies OR games, which you can print and use in any of their stores. Regardless of turnaround time, the movie rental business is all about getting to watch the movies you want, and in that regard Netflix was a constant disappointment to me.

[ChillyWilly @ Dec 19th 2005 1:21AM]

This was very good to read. Nice to see the industry leader (and founder) of online DVD rental stay in the front running. And always nice to see Wal-Mart stick their tail between their legs. Now if they can stop building that behemoth supercenter two blocks from my house, I can be that much happier.

As for #8's comment about Netflix's customer service getting worse, I disagree. Netflix isn't your typical start-up that got bigger and forgot the individual customer. Yes, they have their growth problems, but I've met or talked to very few people who've had unresolved issues with them. I think for them, it's a victory they will not gloat on, but react in beefing up their customer relations. After all, it's how they built their business and I don't think they'll forget that anytime soon.

[Dirty Jer-z @ Dec 19th 2005 1:21AM]

wow, I guess this guy's teacher knows his stuff. He was right on back in March.

6. Posted Mar 4, 2005, 12:52 AM ET by Brodie12Tide
My business strategy class talked about this very industry last week. The interesting thing my teacher pointed out was that Blockbuster entered the DVD-by-mail segment as a defensive strategy. According to his numbers, Blockbuster is losing money by entering this segment that has such small margins. Blockbuster has all of its money invested into brick and mortar buildings and Netflix simply does not have enough money to completely dominate this market segment. So, what is Netflix to do? My teacher seems to think that Netflix will be getting a call from Walmart in the near future to combined. That is just my take though.

[Jeff @ Dec 19th 2005 1:21AM]

I would like to know what titles Blockbuster has that Netflix doesn't. That post almost made me do a spit-take.

[Noah @ Dec 19th 2005 1:21AM]

I have the blockbuster service, and am delighted. I live in the Tampa Bay area, and new movies are in my mailbox the 2nd day after I put the old ones in.

[Rocket Punch @ Dec 19th 2005 1:21AM]

BB for me. Lower price + 2 "GAME RENTAL" every month. The funny things about people who said "death to walmart" is they all go to walmart. LMAO. In addition, I try both NF and BB, they "ALL" (suprise, suprise) have bad service.

NetFlix seemed to still proudly ignore the fact that online video game rental "IS" the future, and this will be the moment that they go downhill.

[Frank @ Dec 19th 2005 1:21AM]

I switched to Blockbuster after waiting 8 weeks & 4 weeks for two new releases (Ladder 49 & The Incredibles) to come available from Netflix. There was no wait from Blockbuster and I have been getting movies in a two-day turnaround.

Netflix was fine up until that point....should have ordered more new release at a time (upon my repeated request).

May be forced to go back to Netflix if Blockbuster doesn't make it.

[Kevin Parrott @ Dec 19th 2005 1:21AM]

Spit away, Jeff, and while you're busy spitting hop on over to each site and do a little research. When I quit using Netflix, Blockbuster carried a lot of the MST3K titles Netflix didn't, and they also had the "World at War" 11-disc 30th anniversary documentary set, while Netflix only had the 5-disc version from a few years ago.

[poulsbo @ Dec 19th 2005 1:21AM]

am I the only one who's very entertained that Netflix will put "buy it at wal-mart!" notes on their page when, likely at least half of what i rent from them will *certainly* not be available for purchase at wal-mart?

[John Opager @ Dec 19th 2005 1:21AM]

I think this is good news, the idea of Wal-Mart getting into any business is scary. Just look what they did to retailing...

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[WheelSee @ Dec 19th 2005 1:21AM]

I actually saw something like this coming when I got an e-mail a month or so back that Netflix was ending it's deal with Best Buy to give their employees a discount(which I've had for three years, even after leaving Best Buy) on the service. And for the guy saying now there are gonna be buy the DVD at Walmart links they will probaly just replace the existing Buy at Best Buy links...

[Tom @ Dec 19th 2005 1:21AM]

I wonder what Netflix had to pay Walmart to go away. The idea that Walmart had its "tail between its legs" is amusing. If Walmart wanted to crush BB and Netflix they could do it.

More likely, they realized that in a couple of years no one will be shipping plastic discs around any more, and that it would be pretty stupid to go to war to seize an island that will be underwater soon enough.

Nonetheless, I'm sure they got their pound of flesh from Netflix, and I mean more than just a few "Walmart sells DVD's" ads.

[wells @ Dec 19th 2005 1:21AM]

yup good for Netflix i love them (wish theyd do VG's and Porn) but hey! but Watch out for MSNetflix we know how Billy (Gates that is) loves a great startup (hotmail)

[ChillyWilly @ Dec 19th 2005 1:21AM]

"I wonder what Netflix had to pay Walmart to go away. The idea that Walmart had its "tail between its legs" is amusing. If Walmart wanted to crush BB and Netflix they could do it."

Just like BB's board of directors has told them about their money-losing online DVD rental service was a bad idea, Wal-Mart's top shelf of exec's probably felt the same when they saw more red than they expected.

Wal-Mart's business model only works when they have a way to consistently and progressively make money. My guess is that after trying to "crush" the competition, they decided it was better to cave in then compete in an area they knew nothing about.

As for what Netflix paid, my best guess on the "undisclosed sum" would be well under a million.

[DCE @ Dec 19th 2005 1:21AM]

While I realize this is just a "strategic partnership" I can't tolerate supporting Wal-Mart in any way; even tangentially. NetFlix is now actively sending business to Wal-Mart by way of online banner ads and (soon) on envelope advertising.

I cancelled my account this morning and joined up with Green Cine. It's not quite as good, and the interface of the site is terrible, but I feel better about supporting them.