Is This a Netflix or Amazon Killer?

Geoffrey the Giraffe is sticking his neck out again.

Toys R Us is jumping into the suddenly crowded digital video market. The toy store chain is launching toysrusmovies.com today, offering streaming video rentals of kid-friendly movies and TV shows.

Should Netflix (Nasdaq: NFLX  ) and Amazon.com (Nasdaq: AMZN  ) be worried?

Netflix, after all, is not only the world's largest premium video service, with 24 million streaming customers in the U.S. alone. The fallen dot-com darling has also been trying to appeal to young families by having a dedicated landing page for kid-friendly streams.

However, Toys R Us isn't taking the smorgasbord route -- at least not for now. In its present incarnation, the new service will only dole out 24-hour rentals of movies at $2.99 a pop and TV show episodes at $1.99 apiece. It's a model that closely mirrors Apple's (Nasdaq: AAPL  ) iTunes or Wal-Mart's (NYSE: WMT  ) Vudu.

So, does this mean that the new service may be more of a threat to Apple or fellow retailer Wal-Mart?

No, if anything, Toys R Us appears to be closer to aping Amazon's model. After all, just as Amazon introduced a tablet last year -- the Kindle Fire, with which owners can purchase digital video rentals -- Toys R Us is rolling out a kid-friendly tablet of its own. Now it's merely fleshing out the ecosystem.

In the end, this is Toys R Us. It may have a huge advantage in marketing to the young families that frequent its stores, but it's not as if Vudu has made much of a dent in the market even though it's backed by the world's largest retailer, Wal-Mart.

Don't dismiss Toys R Us, though. Its tablet is aggressively priced at $150, and it may not be much of a stretch for the retailer to add a buffet component to its digital video service to closer match what Netflix is doing. Disruptors, after all, do come from unlikely places.

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Rick Aristotle Munarriz owns shares of Netflix. The Motley Fool owns shares of Apple, Amazon.com, and Netflix. Motley Fool newsletter services recommend Amazon.com, Apple, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 05, 2012, at 12:35 PM, Matthewuwf wrote:

    Maybe not the most outlandish story title I have ever read on TMF, but close. A solid laugher.

  • Report this Comment On October 05, 2012, at 7:33 PM, davaidesign wrote:

    +1 on the above. If you search "Netflix Killer" on fool.com you will see several articles from the past using a variation of that title. These folks must have a title generator that takes as input the stock involved and the article mood (positive or negative), and spits out a title.

    "Apple" + "negative"

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    "Is This The End of Apple As We Know It?"

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