Netflix Lowering Prices

october 15, 2004

From today's San Jose Mercury News Tech Ticker:

Online DVD rental company Netflix said Thursday that it will cut its fees 18 percent next month to try to counter the expected entrance of Amazon.com into its market. The Los Gatos company is cutting the price of its most popular plan, which allows three titles to be out at one time, from $21.99 a month to $17.99.
Amazon has not announced any plans to launch a DVD rental program, but Reed Hastings has heard from "from several sources" that they will be soon. Netflix has survived Wal-Mart's entry into the online DVD rental business and seems unscathed by Blockbuster's recent entry. I don't see a big worry for Netflix with Amazon's entry, maybe this is a kneejerk reaction? Or maybe Amazon's shipping workflow and distribution system is much better than that of Wal-Mart and Blockbuster and that is what is causing Netflix's worries?