WAL-MART CASTS WEB FOR DVD MARKET.

Byline: Greg Hernandez Staff Writer

Retail giant Wal-Mart, already a dominant player in the booming home video industry, on Tuesday officially launched a DVD online rental service nationwide to compete head-to-head with such players as Blockbuster Inc. and a nearly identical online service offered by Netflix Inc.

With more than 40 million households in the U.S. now equipped with DVD players, the battle for consumer dollars in this category has intensified in the last two years. Bonus features, superior technical quality and major marketing pushes from movie studios has helped the DVD to quickly replace VHS tapes as the format of choice.

``Clearly, this is the format that consumers are really embracing,'' said Wal-Mart spokeswoman Cynthia Lin.

``One of the advantages of this is it's delivered to your door, can be returned through the mailbox and you don't have to worry about making trips to the video store or about late fees. American consumers are estimated to spend $1.2 billion a year in late fees. This eliminates that.''

Based in Bentonville, Ark., Wal-Mart test-launched the online rental service in October with a single distribution site in Georgia. It has since expanded the sites to six locations throughout the U.S. in order to get DVD orders to 93 percent of its customers within 48 hours.

Wal-Mart said it has 13,000 DVD titles available for rental. Consumers can sign up for Wal-Mart DVD Rentals at Walmart.com and choose from three monthly subscription plans.

All of the plans have unlimited movie rentals for an unlimited amount of time but differ on how many titles a customer can check out at one time. A $15.54 per month plan allows for two movies to be checked out at a time while a $18.76 monthly plan allows for three. To check out four DVDs at a time, customers pay $21.94 per month.

Wal-Mart's announcement Tuesday came a day after Netflix raised its second-quarter guidance, saying it now predicts earnings of $3 million to $4 million, up from its previous expectation of a slight loss.

The Los Gatos company said it expects to have 1.13 million to 1.15 million subscribers at the end of the second quarter making up more than 90 percent of the online subscription rental market. Wal-Mart has not released its subscriber data.

``We don't see it as a real threat until they develop more critical mass in their subscriber base,'' Netflix spokeswoman Lynn Brinton said Tuesday. ``They haven't been a threat, and we don't think they will be. You can't discount the value of our brand, and 40 percent of our members come from word of mouth.''

Netflix, launched in 1998, has 20 shipping plants across the country and offers overnight delivery to 60 percent of its customer base. Its four rental pricing packages range from $13.95 to $39.95 per month. The higher-priced plans allow for more movies to be rented at one time.

Meanwhile, Blockbuster spokesman Randy Hargrove on Tuesday called the online rental business ``a limited business opportunity.''

``Consumers spent more than $8 billion in the U.S., they spent less than $200 million renting movies online,'' Hargrove said. ``We believe the real win for Blockbuster customers may be a fully integrated store and online combination.''

Since last summer, Blockbuster has been testing a store-based subscription program in 700 stores in the New York City, Salt Lake City, Houston, Seattle, Phoenix, and Hartford, Conn., markets. For $25 a month, customers can rent as many movies as they want, two or three at a time, for as long as they want.

``This approach allows customers to rent online or at the store,'' Hargrove said. ``We will be looking at expanding it to additional markets.''

Greg Hernandez, [phone]

greg.hernandez(at)dailynews.com