The DVD rental business is a hotly contested market, with Blockbuster and Netflix (and a few others) battling mightily for your confidence, your loyalty and your money.
In the past month or so, we've seen Blockbuster give away free DVDs to Netflix customers (in addition to the free in-store rentals they already give their own customers) and add games to its in-store rental mix. For its part, Netflix finally fulfilled the prophecy inherent in its name and actually started to stream movies over the internet.
And now Reuters is reporting that Netflix has taken the first step in what may prove to be yet another price war in the category. Netflix has dropped the price of its cheapest DVD rental plan by one dollar to just $4.99. For that entry level price, you can rent one DVD at a time, with a maximum of two per month.
We haven't received a press release on this yet, but a visit to the Netflix homepage clearly shows the new lower price of $4.99 prominently displayed.
At that price, Netflix compares favorably with many traditional brick and mortar video stores. But can they make money offering DVD rental by mail at five bucks a month?
Reuters quotes Netflix spokesman Steve Swasey, who says "This is in response to an ever-evolving and competitive market. We are lowering an introductory price but we have profitability objectives and they stay in place."
Loosely translated, that means that the offer is meant to appeal to fence-sitters who have heard about Netflix and/or this new-fangled concept of online DVD rental, but haven't yet signed up. Netflix says that once on board, many of those customers upgrade their plans and become longterm profitable subscribers.
And we're guessing they have data that shows that's exactly the case... they've apparently been testing the $4.99 price point for almost a year.
[Previously: No, You're Not Dreaming; Netflix To Start Streaming]
[Previously: Blockbuster Decrees: Free DVDs For Netflix Devotees]
[Previously: If Only... / Analysts Assess "Total Access"]
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