The moment that DVD rental firms have been dreading is apparently close at hand. Amazon.com (Nasdaq: AMZN ) is launching a DVD rental service in the United Kingdom, beating Netflix (Nasdaq: NFLX ) -- now officially a rival -- to the punch.
On our Netflix discussion board, debate is already on as to what the impact of Amazon's expatriate move will be on the Internet upstart that broke all the rules. In the course of that discussion, some have pointed out that the U.K. is a smaller market and more logistically manageable than here in the U.S. It does seem a great place for Amazon to cut its teeth on this new offering.
A bit more threatening, though, is the fact that Netflix had delayed its plans to enter the U.K. market, focusing on a full-court press here in the U.S. -- ostensibly to guard against Amazon's expected encroachment but also quite clearly to fend off Blockbuster (NYSE: BBI ) , which recently adopted a similar online, mail-order strategy.
If there's anything that makes Amazon's move sound a little less threatening, at least for the time being, it's the fact that it's neglecting the "all-you-can-eat" model familiar to Netflix and now Blockbuster. Instead, it will charge 7.99 pounds ($15.50) for customers to have two DVDs out at a time, capping the amount a customer can rent per month at a mere four flicks. (There's a more pricey package that offers six rentals, tops, a month.) In an added perk, Amazon U.K. offers an additional 10% discount to rental customers who wish to buy a DVD.
I would call Amazon's limited offering a serious weakness, although I would imagine this is a way that it can build and develop the service at a slower pace. However, for Amazon to get serious about causing its rivals any strife it will likely have to adopt what has already become the industry's standard model.
The DVD rental area is integrated with Amazon U.K.'s DVD sales section (here's a peek at what it looks like). Again, we can likely await further innovations in that area, like integration of its Internet Movie Database (IMDb.com) service, as well as its search engine, A9.com, which it has been trying to push through token discounts on the Amazon site.
For now, Amazon's move probably hurts Blockbuster most, since Blockbuster has already established a presence in the U.K. Even so, with Amazon's limited service, the pain doesn't seem like it will be that great. Although today's news definitely puts Amazon in the game, waiting and watching from the sidelines is still in order.
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Alyce Lomax does not own shares of any of the companies mentioned, although she's been up to her ears in DVDs through a subscription to Netflix.