Netflix Sticks It To Blockbuster, Cuts Prices Again

The consumer-friendly price war between Netflix and Blockbuster rages on this week as Netflix cuts the price of its two most popular subscription plans by $1. The cost of Netflix’s 3-DVD plan will drop to $16.99, while the 1-DVD plan will fall to $8.99. The price drops will make Netflix plans $1 cheaper than comparable Blockbuster plans featuring Total Access. Both retailers slashed the price of their 2-DVD options last month to $13.99. The latest move from Netflix is meant to drain much-needed cash from Blockbuster. From the Chicago Tribune:

Stepping up its attack on Netflix also has been hurting Blockbuster, which has had to spend more heavily on DVDs to ensure sure its stores have enough discs to keep up with the additional demand from its roughly 3 million online subscribers. The company lost $49 million in the first quarter.

Blockbuster may not be willing to endure those kinds of losses much longer, especially with the recent hiring of a new CEO, James Keyes. In a Securities and Exchange Commission filing last month, Blockbuster said it will modify its online service “to strike the appropriate balance between continued subscriber growth and enhanced profitability.”

This rabid price war is exactly how the free market should work. If only the telecommunications sector fought this way…

Netflix to lower online DVD rental fees in battle with Blockbuster [Chicago Tribune]
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