Wal-Mart Plans Another DVD Effort

Wal-Mart Stores Inc., bolstering its venture into online DVD rentals, announced Tuesday a low-priced DVD rental program that analysts said could pressure market leader Netflix Inc.

When Wal-Mart first outlined its push into the hotly contested DVD segment last fall, analysts anticipated that it would be only a matter of time before the retailer tried to undercut established rivals, as it has done in the food and apparel sectors.

Netflix, based in Los Gatos, Calif., is the leading U.S. online DVD renter, with about a 95% share of the market. It makes its money by shipping DVDs to customers, who make their movie choices on the Internet.

Wal-Mart, the newcomer in DVD rentals, also has tried to undercut Blockbuster Inc. by selling cheap DVDs. Blockbuster is testing its own DVD rental program.

“It’s difficult to see a sustainable business model for Netflix,” said R.J. Jones, a Delafield Hambrecht analyst, pointing to Wal-Mart’s powerful marketing machine.

But Netflix spokeswoman Lynn Brinton said, “Until Wal-Mart reaches 100,000 subscribers, we don’t see them as a real threat. We see Wal-Mart’s move as more of a battle for the No. 2 spot.”

Bentonville, Ark.-based Wal-Mart said customers who want to rent two DVDs at a time will be charged $15.54 a month, compared with the subscription fee of $18.86 the company promoted when it launched its service.

For three rentals at a time, Wal-Mart said the price will be $18.76, with a monthly fee of $21.94 for customers who want four rentals.

Netflix, one of a few Internet firms to survive the dot-com bubble, charges a fixed $19.95 a month for an unlimited number of DVD rentals, but with no more than three at one time, without due dates, late fees or shipping charges. Netflix’s biggest plus, compared with Wal-Mart, is its sprawling distribution infrastructure across key markets to ensure immediate customer DVD shipments.

Netflix expects to end the current quarter with 1.13 million to 1.15 million subscribers, compared with its earlier target of 1.11 million to 1.16 million.

Wal-Mart shares rose 97 cents to $54.76 on the New York Stock Exchange. Netflix shares slipped 30 cents to $22.70 on Nasdaq.