Netflix Share of Video/DVD Rental Market on the Rise; Blockbuster Moves into Online Subscriptions to Retain Market Advantage

[August 12, 2004]

Netflix Share of Video/DVD Rental Market on the Rise; Blockbuster Moves into Online Subscriptions to Retain Market Advantage

PORT WASHINGTON, N.Y. --(Business Wire)-- Aug. 12, 2004 -- According to recent reports in the news media, video rental leader Blockbuster Inc. is set to begin offering customers DVD's delivered to their home by mail, using the business model pioneered by online DVD movie rental subscription service NetFlix Inc. According to recent consumer information compiled by The NPD Group, this latest move by Blockbuster might be a timely, strategic reaction to the fact that Netflix enjoys a growing share of the movie rental market.

According to NPD, Netflix's share of the rental market has increased more than four percent -- from 8 percent of all movies rented in the fourth quarter of 2003 to 12.5 percent in the second quarter of 2004. In addition, as of June 2004 local rental shops controlled 14 percent, which is a three percent gain in the same timeframe.

By comparison, as of June, movie rental leader Blockbuster controlled nearly 40 percent of the rental market, which is down a little more than three percent since the final quarter of 2003. The next largest chain, Hollywood Video, posted a net loss in share of just under two percent in the same timeframe.

"The video subscription concept pioneered by Netflix is obviously coming of age," said Russ Crupnick, president of NPD Music and Movies. "The fact that Blockbuster has decided to leverage their long-standing industry clout in an effort to appeal to a growing consumer segment shows that the company remains serious about protecting their hard-won equity in the video rental business."

Source: NPD's VideoWatch collects video acquisition information on a continuous basis from members of NPD's consumer panel of more than 2.5 million registered members. Detailed purchase information is collected from an average of 3,000 video buyers and renters each week. NPD's video rental definition includes traditional store rentals and subscription services. This information is balanced to represent the U.S. population, age 18 and older.

About The NPD Group, Inc.

Since 1967 The NPD Group has provided reliable and comprehensive sales and marketing information for a wide range of industries. NPD provides critical knowledge on what is selling, where, to whom and why to help our clients make more successful, fact-based business decisions. Today more than 1,300 manufacturers and retailers rely on NPD to help them better understand their customers, product categories, distribution channels and competition in order to help guide their business and positively impact sales and revenues. Information from The NPD Group is available for the following major vertical sectors: apparel, appliances, automotive, beauty, cellular, consumer electronics, food and beverage, foodservice, footwear, home improvement, housewares, imaging, information technology, music, software, travel, toys and video games.

About NPD Music and Movies

NPD Music and Movies, a division of The NPD Group, provides reliable in-depth perspective on the most important issues facing today's music and video industry. MusicWatch and MusicWatch Digital are the flagship information services that reports on what consumers buy, as well as where -- and why. These two complementary services provide a detailed look at today's music consumers, covering such critical issues as consumers' habits related to downloading music and burning CDs, key influences on music purchases and customer viewpoints on specific retailers. NPD VideoWatch tracks the purchase and rental of home movies, as well as consumer habits relating to home video. NPD Music and Movies provides the consumer insight needed to understand the entertainment marketplace and discover where music and video consumers are today - and where they'll be tomorrow.

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