January 1, 2005

NOTHING EVER GETS MORE EXPENSIVE:

The mailman helps DVD rental prices fall (Eve Tahmincioglu, January 1, 2005, The New York Times)

Many U.S. consumers, upset over late fees, are signing up for mail-order services like Netflix. Americans paid about $1.3 billion in 2004 in late fees, said Tom Adams, president of Adams Media Research, a market analysis firm in Carmel, California. He predicted that 4.7 million Americans would have subscribed to a mail-order DVD service by the end of 2004, and he predicted that that number would rise to 17 million by 2009.

Netflix, based in Los Gatos, California, was the first company to offer this service, in 1999, and it still dominates the sector. The company expected to end 2004 with 2.5 million subscribers, up from 1.48 million a year earlier, said Reed Hastings, the chief executive, who came up with the concept after paying a $40 late fee for an overdue rental of the film "Apollo 13" in 1997.

Wal-Mart Stores and Blockbuster have moved into the industry, and in October, a price battle ensued over rumors that Amazon.com might enter the market. Netflix lowered its monthly fee to $17.99, and Blockbuster, which started its mail-order business in August, quickly lowered its monthly fee from $19 to $17.50 and then, last week, to $14.99. It also recently announced an easing of late fees at its stores.

Blockbuster's online offer includes two rentals a month from its stores. Wal-Mart, which entered the market in June 2003, in November cut the price of its plan that offers three DVDs at a time. The plan, which also offers unlimited monthly rentals, now costs $17.36, down from $18.76. Wal-Mart also has a four-DVD plan for $21.54, and a two-DVD plan, its most popular, for $15.54.

If competition intensifies, prices could fall again, while variety is likely to expand, Adams, of Adams Media Research, said. Amazon.com has not said whether it plans to enter the market in the United States. But it introduced a service in Britain in December. "We are in a good position to offer online rentals in all our geographies," said Jorrit Van Der Meulen, director of subscriptions for Amazon.com, based in Seattle.

Posted by Orrin Judd at January 1, 2005 8:40 AM
Comments

News came over the wire today that Blockbuster is eliminating late fees completely.

Posted by: Joe at January 1, 2005 6:21 PM

Considering that all these mail movies services offer is delivery, it will be hard for them to distinguish themselves from competitors at a non-price level.

Posted by: Chris Durnell at January 1, 2005 8:49 PM

The mail delivery companies are merely a stop-gap measure, and I wouldn't want to invest in them (or in Blockbuster). Shortly, all movies will be available for downloading directly to you home and the mail function will be eliminated entirely.

Posted by: Thom at January 3, 2005 12:51 PM
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