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Wal-Mart Hands in DVD Rental Card

Retail giant Wal-Mart is calling it a wrap on its online DVD rental business, opting instead to concentrate on DVD sales while attempting to move existing customers to new partner Netflix .

The onetime online movie rental rivals have come to terms on a deal in which Wal-Mart will drop its rental business in exchange for Netflix promoting Wal-Mart's DVD movie sales. In return, Netflix will encourage its subscribers to purchase DVDs from Walmart.com.

"We've experienced tremendous growth in our online movie sales, and are committed to enhancing our focus in this business at Walmart.com. We're equally excited to team with Netflix, the pioneer of online movie rentals, which not only distinguishes both of our core online competencies, but offers a complementary solution of value, service, and convenience to customers," John Fleming, Wal-Mart's executive vice president and chief marketing officer, said in a statement.

News of the deal Thursday sent the Los Gatos, Calif.-based Netflix shares soaring $3.35, to $18.85 in early NASDAQ trading.

Under the terms of the agreement, customers of Wal-Mart's DVD rental service will get the chance to continue their subscriptions with Netflix at their current price for the next year, according to the company. Wal-Mart says it plans to promote Netflix on its Web site.

"This agreement bolsters both Netflix's leadership in DVD movie rentals and Wal-Mart's strong movie sales business, while providing customers even more choices and convenience," Netflix co-founder and CEO Reed Hastings, said.

Neither company disclosed the financial terms of the partnership.

Netflix is the world's largest online DVD movie rental service boasting more than three million members and carrying over 40,000 titles. Members can rent as many DVDs from home and have them delivered usually in one business day. There are no late fees and no due dates, and shipping is free both ways for $17.99 a month.

Wal-Mart, which did not disclose the number of customers using its rental service, had charged $12.97 per month for its service. The monthly fee allowed users access to two titles at a time.



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