Wal-Mart starts online DVD rental plan

LITTLE ROCK, Ark. -- Wal-Mart didn't need a long market test to make the jump into the online DVD rental business.

After a seven-month trial with one DVD distribution point, the world's largest retailer now has six outlets and its Wal-Mart DVD Rentals operation is open for business. Movies are ordered on the Internet and can reach 90 percent of the nation within two days, the company says.

"I think customers are really responding to the convenience of renting online," Wal-Mart spokeswoman Cynthia Lin said Tuesday. "There's no more late fees and no more trying to get to the local rental stores. It's very convenient."

Lin said the increased sales of DVD players at its stores and from the Web site pushed the Bentonville-based company to join Netflix and Blockbuster, which started its service last summer.

"We feel that Wal-Mart's entry, along with Blockbuster's, they will end up in a battle for the No. 2 spot," said Lynn Brinton, Netflix's director of communications.

"Netflix has the No. 1 spot in the market with 1 million members.

"We're not sure what Wal-Mart has, but we're sure it's a fraction of that. Until Wal-Mart hits 100,000 they won't be a threat," Brinton said.

Subscribers to online DVD rental companies receive movies by mail and return them in prepaid postage envelopes. The services were started as a way to circumvent late fees at video rental stories, which Lin said are expected to reach $1.2 billion this year.

Lin wouldn't say how many subscribers Wal-Mart served during its test or how many have signed up since. During the trial period, the service cost $18.86 per month for DVDs mailed from Carrollton, Ga.

Now, there are three price plans, starting at $15.54 for unlimited monthly rentals with a maximum of two out at a time. To keep three or four movies, the subscriptions will cost $18.76 and $21.94.

Wal-Mart has 13,000 movie titles and it will have distribution points in Arkansas, California, Georgia, Indiana, Nevada and New York. Lin said there are plans to open more in the future.

With the number of DVD players growing from 55.9 million U.S. households in 2002 to 97.6 million in 2007, annual spending on DVD rentals will soar from $3.2 billion to $8.4 billion during the next five years, predicts Adams Media Research of Carmel, Calif.

Netflix, which has 15,000 movie titles, opened two new shipping centers in May to give it 20 distribution centers. Brinton said Netflix currently provides 60 percent of its subscribers with next-day delivery and that by the end of the year it will reach 75 percent.

Netflix passed the 1 million subscriber mark this year. Its basic service costs $19.95 per month, allowing customers to rent an unlimited number of DVDs per month with three out at one time. Its other plans range from $13.95 (four DVDs per month, two at a time) to $39.95 (unlimited rentals, up to eight at a time).

Netflix reported a record $55.7 million total revenue for the first quarter, up 82 percent compared to $30.5 million for the first quarter 2002, and up 23 percent compared to $45.2 million for the fourth quarter 2002.

------

On the web

www.walmart.com

www.netflix.com