Netflix gained $1.68 or around 8% in early trading Wednesday after the announcement.
Blockbuster also announced they had “invested significantly in its “Total Access” during the first half of 2007 to capture market share” and that it “plans to modify the offering that it believes will strike the appropriate balance between continued subscriber growth and enhanced profitability.”
What this says to me is they are going to raise their Total Access price, which I have stated before isn’t sustainable in the long run because they lose money at the store when a customer exchanges online rentals for free in-store rentals. The only other way they make money in the store is when those same customers either buy snacks or rent video games.
Where this all leads to in the long run is still to be determined but I am long Netflix (NFLX) because I think they offer a superior service, have a better selection of films to choose from and many of them you can watch directly online. Downloads of movies and TV shows are fast and within about 30 seconds you can watch cable quality programming.
