Ease, cost draw customers
to online DVD rentals

CRAIG T. KOJIMA / CKOJIMA@STARBULLETIN.COM Netflix delivers the DVDs customers request in a convenient pre-paid mailer. After watching the movie, Netflix members like Kyle Galdeira insert it back into the mailer, drop it in the mailbox, then wait for their next set of DVDs to arrive.

When Hawaii Kai resident Kyle Galdeira stopped renting DVDs from Blockbuster Video, it was for one simple reason: He was tired of paying late fees.

"I always had trouble remembering to return them," Galdeira said. "I was getting busy with school and baseball and work."

So he decided to sign up with Netflix, an online DVD rental service without the hassle of due dates or late fees. Since becoming a member in 2003, Galdeira has been extremely satisfied with his experience.

Blockbuster's recent decision to do away with late fees came too late for converts like Galdeira.

"(Netflix is) just a lot easier," he said. "It's so fast, compared to driving to the video store, waiting in line and all of that."

After signing up with a credit card at Netflix's Web site, members have access to about 30,000 movies in more than 250 categories.

DVDs are shipped from one of the company's 29 shipping centers located across the country (Hawaii residents are serviced by a shipping center located on Oahu), with about 85 percent of all rentals delivered to members the day after they are mailed.

Once members finish watching a movie, they place the DVD back in the postage-paid envelope it arrived in and drop it in any mailbox. When Netflix receives the DVD, it sends the next one listed in the member's queue on its Web site.

"It has everything pre-labeled," Galdeira said. "I'd just watch one and send it back. ... I don't think there's ever been a time when I've been waiting for a movie (to arrive)."

FOUNDED IN 1997 by CEO Reed Hastings, the Los Gatos, Calif.-based company started out as the mail-order equivalent of a neighborhood video store.

Customers paid rental fees for each DVD they watched, and late fees if the movie wasn't mailed back in time. It wasn't until 1999 that management decided to make the switch to its current business model.

These days, Netflix customers pay $17.99 a month to rent any three DVDs at once. Other membership plans allow for five or eight movies to be rented simultaneously; an $11.99 plan allows for two movies out at a time, with a maximum of four rentals a month.

In the last five years, the company has seen its customer numbers skyrocket. With 2.6 million paid subscriptions at the end of 2004, Netflix enjoyed a 76 percent increase in customers from the year before. According to its Web site, more than 3 million DVDs are shipped to members each week.

NETFLIX ISN'T the only option for DVD rentals online. Blockbuster launched a similar service with a lower price ($14.99 per month with three movies out at a time) last year, and eliminated all late fees at its traditional stores earlier this month.

Other options include Wal-Mart's DVD rental service at Walmart.com, Maryland-based DVDAvenue.com and California-based Qwikfliks.com and Greencine. com. Online retailer Amazon.com is also rumored to begin offering DVD rentals to its U.S. customers later this year, after starting a similar service in Britain last year.

But will traditional brick-and-mortar video stores ever completely disappear? Not if there are more consumers out there like Nicole Yanagihara.

The Salt Lake resident signed up for Blockbuster's online service last year with her boyfriend, but she's also a fan of the two in-store rental coupons that come with her monthly subscription.

"We use them every month," she said. "It's a reason to go out and get a movie."