12/23/2005

Netflix wins first round in online DVD rental war

Filed under: — By Aviran Mordo @ 3:36 pm

When the head of Netflix Inc. said rival Blockbuster Inc. threw “everything but the kitchen sink at us,” the world’s largest video rental chain responded by sending him … a kitchen sink.

The message from last January’s interchange was clear: Blockbuster, with $6 billion in 2004 revenue and 5,500 domestic stores, intended to own online DVD rental, an $8 billion industry pioneered by Netflix.

“This year was about Blockbuster taking a run at us,” Netflix Chief Executive Reed Hastings told Reuters at the company’s Beverly Hills offices. “They chopped price. They emptied their balance sheet.”

But despite Blockbuster’s costly offensive, Hastings said Netflix was on track for net subscriber additions of 1.5 million for 2005 for a total of 4.1 million — the midpoint of its target range.

Meanwhile, Blockbuster, which has been roiled by management and debt problems, saw the subscriber base at its 16-month-old online service stall at 1 million.

The companies also switched places in market value over the course of an intense, yearlong price war, with Netflix — which has no debt — now worth $1.5 billion, compared with Blockbuster at $684 million and more than $1 billion in debt.

Source: Reuters

 

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