ALEX CHADWICK, host:
Back now with DAY TO DAY. I'm Alex Chadwick.
The world's largest retailer, that's Wal-Mart, is giving up on the business of renting DVDs over the Internet. Wal-Mart says it's going to direct its customers to Netflix. That's the company that pioneered online DVD rentals. Joining us is Bob Moon. He's New York bureau chief for "Marketplace."
Bob, how come the giant Wal-Mart couldn't seem to beat an upstart like Netflix?
BOB MOON reporting:
Well, Alex, sometimes you're the windshield, sometimes you're the bug. Of course, if the windshield's not moving all that fast, you just might survive, and that may be the key here. Netflix may have been the upstart, but it's got a head start and that momentum is something that Wal-Mart apparently just couldn't overcome. Industry analysts figure Wal-Mart attracted maybe 100,000 online DVD subscribers. Netflix already has three million subscribers. Wal-Mart says it wants to focus on what it does best now, selling DVDs, so it's going to be giving its rental customers the chance to sign up with Netflix for the next year at their current monthly subscription rate of about $13. Most Netflix customers pay around $18 a month. And Wal-Mart will be promoting the Netflix service on its Web site.
CHADWICK: So this is a help for Netflix. How much of a loss is it for Wal-Mart?
MOON: Well, you know, it's really amazing how much difference there is between the help it will be for Netflix and what it means to Wal-Mart. Last year Netflix reported sales of $506 million. Well, Wal-Mart sells that much merchandise in less than a day, so you can see that it really didn't mean that much to Wal-Mart in terms of monetary gain. The online rental market was never really that big of a deal, it seems, for Wal-Mart. It launched its online rental service back at the end of 2002. And it never really promoted it heavily. On the other hand, analysts, as you mentioned, do say that this helps Netflix regain some traction, but even there it remains to be seen just how much of a boost this will give Netflix ultimately.
The two companies haven't disclosed the financial terms of their partnership. And the head of Netflix says it's just too early to say how many of Wal-Mart's subscribers will actually make the jump. In fact, Netflix issued a statement saying the additional subscribers won't materially impact its own subscriber growth, and it won't be revising the guidance that it's already given investors on its expected performance.
CHADWICK: What about Blockbuster and all this, which has all these stores all over the country, but is trying to move into online, isn't it?
MOON: Yeah, they've been making some aggressive moves to push into the online rental business. And at first that irritated a lot of shareholders, the delay, because Blockbuster dismissed Netflix as a passing fancy, of sorts. Well, lately, it's been signing up online subscribers for about $3 a month less than Netflix. Well, it announced just yesterday it might not be undercutting Netflix for much longer. It started advertising a test price that's the same as what Netflix charges.
Today in the "Marketplace" news room, we're playing with toys, toying around, so to speak, with the latest installment from a galaxy far, far away.
CHADWICK: Have fun. Bob Moon of public radio's daily business show "Marketplace" from American Public Media.
Copyright © 2005 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.
Accuracy and availability of NPR transcripts may vary. Transcript text may be revised to correct errors or match updates to audio. Audio on npr.org may be edited after its original broadcast or publication. The authoritative record of NPR’s programming is the audio record.