The bargain bin is getting bigger and cheaper at Netflix (NASDAQ:NFLX). The company sent out an email to subscribers yesterday, inviting them to check out its "new and improved" site to buy previously viewed DVDs.
Nearly 300 discs were available last night, ranging in price from $5.99 to $11.99 apiece. Buyers get a protective case, the original artwork, and free shipping. That last point bears repeating, since even an online retailer like Amazon.com (NASDAQ:AMZN), which prides itself on the free delivery of new media orders, won't subsidize the shipping costs on cheaper goods sold through its third-party marketplace.
For those scoring at home, Netflix launched its original DVD retail store last June. The company initially priced all of its previously borrowed discs at $10.99, before quickly marking them down to the more appealing $9.99 mark.
I'm guessing that sales weren't too brisk, if the company is now appealing to the thrifty with a $5.99 price point. There's a pretty good collection of quality movies available at that price, too, just in case you thought it was all Ishtar.
The lower prices and bigger selection are a smart move for Netflix. With subscriber growth slowing, it can't count on significantly wider audiences absorbing its older titles once the "new release" fervor dies down. Even though there are secondary markets to gobble up used discs, $5.99 and up is a more attractive exit strategy for many of these discs.
If you've ever received a scratched DVD, you probably aren't giddily checking out what's on sale. The bias of buying tired discs isn't lost on Netflix, though; the company is guaranteeing all of its orders.
With free shipping and attractive titles, the $5.99 price point will resonate with movie buffs. It's not much more than the standard stand-alone rental at the local Blockbuster (NYSE:BBI) or Movie Gallery (NASDAQ:MOVI) store. Some customers may see it as a premium rental that you never have to return.
In the end, it's good news for Netflix -- and more pain for the old-school rental chains.
Netflix and Amazon have both been recommended to Motley Fool Stock Advisor newsletter subscribers.
Longtime Fool contributor Rick Munarriz is a Netflix shareholder and plans to stay that way. He has been a subscriber and investor since 2002. T he Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
