Netflix claims Amazon is about to enter the DVD rental market.
Netflix announced a plan to cut prices to $18/month from $22/month, but that's going to be hard on Netflix if they want to maintain profitability and service quality. After all, they just raised their price from $20/month to $22/month back in June 2004, citing the need to improve service quality as the reason for the increase. It doesn't help that Blockbuster immediately cut their price on their Netflix-look-alike service to $17.49.
Netflix is very good at what they do, but going up against Amazon is going to be brutal for them. In The Long Tail, for example, Netflix and Amazon were talked about in the same breath, both satisfying customers with mass customization instead of mass market. Now they'll be in direct competition.
Update: The NYT E-commerce Report column today is "Amazon Rumor Ruffles DVD Rivals". A great overview of the upcoming entry of Amazon into DVD rentals and what it means for Netflix.
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