Wal-Mart (WMT) Could Destroy Netflix (NFLX) in 2012
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Here's a good reason Netflix (Nasdaq: NFLX) might be screwed next year: Wal-Mart (NYSE: WMT) is clever.
Management at Wal-Mart sure did seem to keep cool despite losing a recent class action suit against Netflix. Although the world's largest retailer has to shell out about $27.5 million to 40 million Netflix subscribers, there's a real kicker: Wal-Mart may pay back Netflix customers in the form of... Wal-Mart gift cards.
For about $1.10 per customer (about 68 cents of value, a 40 cent postage fee, and 2 cents to make), Wal-Mart could potentially get 40 million Netflix subscribers to redeem the cards online or by showing up at a retail location. Customers will miss out on a further 25 percent of that, which is going to go toward legal fees (still thinking about law school?).
But what's at Wal-Mart or Walmart.com? Netflix competitor Vudu.
Wal-Mart will surely let Netflix users know the service is available for a low price and offers similar shows to Netflix. Right now, Vudu has a smaller catalog of offerings than Netflix does; give Wal-Mart a good reason to invest in the segment and it might be a couple of rough years for Netflix.
There are a couple of caveats here. First, this author would probably toss the card away (read: recycle, of course) immediately, or give it to some kid to play with. Two, many others will probably do the same, meaning the majority of potential new customers is whittled down. Three, Netflix is pretty sticky, and available on a bunch of devices that many consumers already have in their home or in their hand. Also, it's tough to change someone over when they're already used to the interface, even if its a cheaper and/or better product (note: Streetinsider is not saying Vudu is or is not a better quality service or more well-priced than than Netflix).
The final settlement of the suit is next February, giving Netflix some breathing room. Or maybe Netflix will just "drop the whole thing" and "save Wal-Mart the hassle."
Netflix is 1.9 percent lower Wednesday, while Wal-Mart is up 1 percent.
Management at Wal-Mart sure did seem to keep cool despite losing a recent class action suit against Netflix. Although the world's largest retailer has to shell out about $27.5 million to 40 million Netflix subscribers, there's a real kicker: Wal-Mart may pay back Netflix customers in the form of... Wal-Mart gift cards.
For about $1.10 per customer (about 68 cents of value, a 40 cent postage fee, and 2 cents to make), Wal-Mart could potentially get 40 million Netflix subscribers to redeem the cards online or by showing up at a retail location. Customers will miss out on a further 25 percent of that, which is going to go toward legal fees (still thinking about law school?).
But what's at Wal-Mart or Walmart.com? Netflix competitor Vudu.
Wal-Mart will surely let Netflix users know the service is available for a low price and offers similar shows to Netflix. Right now, Vudu has a smaller catalog of offerings than Netflix does; give Wal-Mart a good reason to invest in the segment and it might be a couple of rough years for Netflix.
There are a couple of caveats here. First, this author would probably toss the card away (read: recycle, of course) immediately, or give it to some kid to play with. Two, many others will probably do the same, meaning the majority of potential new customers is whittled down. Three, Netflix is pretty sticky, and available on a bunch of devices that many consumers already have in their home or in their hand. Also, it's tough to change someone over when they're already used to the interface, even if its a cheaper and/or better product (note: Streetinsider is not saying Vudu is or is not a better quality service or more well-priced than than Netflix).
The final settlement of the suit is next February, giving Netflix some breathing room. Or maybe Netflix will just "drop the whole thing" and "save Wal-Mart the hassle."
Netflix is 1.9 percent lower Wednesday, while Wal-Mart is up 1 percent.
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