At first glance, it looks like a great deal. Online DVD rental first-mover (and Motley Fool Stock Advisor recommendation) Netflix
First, the deal wasn't exactly free. The two companies agreed to advertise each other's complementary services for an unspecified period of time. But who's the real winner here? When I logged into my Netflix account over the weekend I was greeted by huge banner advertising Wal-Mart's cheap DVDs. This is the first time such advertising has appeared on Netflix.com; the company has, until now, been adamant about keeping a very clean brand.
Of course, the deal does go both ways: The DVD rentals section of Walmart.com now guides customers toward Netflix. But is that portal as valuable as it might seem at first? Even with a lower price point in the last two years it has managed to attract only an estimated 100,000 or so subscribers.
Second, and more troubling for long-term holders, it's quite possible this development means there is no deal with Amazon.com
My worry is that any deeper deals with Wal-Mart.com mean that Netflix is essentially settling for second best, having been unable to secure an attractive deal with Amazon.com. Also, if Netflix is advertising for Wal-Mart, it also makes any future deals with Amazon.com harder to work out. How can Amazon.com justify partnering with a company that urges its subscribers to buy their DVDs from their top competitor, especially when there is a viable alternative -- Blockbuster
If the Wal-Mart cross-promotion does end up being a deal breaker for a future Netflix/Amazon.com pairing it will be a shame. I've always thought that Amazon and Netflix were a great fit -- aside from the complementary products, the two companies have much in common that should cause their CEOs to see eye-to-eye. After all, Netflix is doing for movie rentals what Amazon.com did for book sales.
But if it wasn't meant to be, partnering with the world's largest retailer will have to do.
Want more articles on Netflix and Blockbuster?
- Netflix's Spin Move
- What Is Netflix's Greatest Threat?
- Not Another Price War
- Better Late Than Clever
- The Two Million Man Moat
Fool contributor Marko Djuranovic owns shares of Netflix and no other company mentioned in this article.