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.
