Thursday, December 09, 2004


NFLX rose sharply today on news that AMZN will indeed start a similar DVD rental program. As long term holders of both firms, we are pleased with the decisions of management in both firms. AMZN played its cards cards carefully. They will open in Europe at a slightly higher price per month than the NFLX price! This is excellent news for both companies. Neither company needs to get into a price war and neither needs to be fighting for the same customers for now. The pond is a big pond and there are a lot of big fish to catch. Let the the small fry continue to go occasionally to the local rental store. The frequent user will find that the DVD by mail service is by far the lowest cost way to watch 10 or more movies per month.

NFLX has over 25,000 titles in stock and in most of the US they offer next day delivery. Blockbuster is still trying to buy out the local rental stores. I believe the central warehouse is the way to offer the fastest delivery until internet delivery takes over.

Today John Malone, the cable king and chairman of Liberty Media, said that he believe VZ is spending billions unnecessarily. He believes that SBC is taking the smarter approach to deliver high speed video to the home. Malone is a very smart man. His Starz movie network is already available online, 150 movies for $12.95 per month. It will take a few years to build out the high speed systems. My family owns, NFLX, AMZN, L, LVLT, FON, LU, NT, MOT, and TIVO. All of these firms are in one way or another tying to help deliver media to the home.

Malone is probably right that VZ may build over-capacity. In the mean-time it is wonderful to learn that AMZN is taking the smart approach to not bump heads directly with NFLX. This was good news for both stocks and both should continue to increase in value.