Netflix Parties after Blockbuster Election

May 13, 2005

Blockbuster’s largest shareholder was elected to their board yesterday amid vows to curtail spending. Analyst’s guess as to the first target for cuts? Their online rental program, where they’re throwing money at trying to catch Netflix.

Netflix stock rose 9 percent after the vote, according to Reuters.

“Netflix investors are saying, ‘Obviously Blockbuster is going to abandon online,” Wedbush Morgan Securities analyst Michael Pachter said. “It’s not that obvious. Icahn is not in charge — he has three out of seven votes.”

Blockbuster is locked in an expensive price war with Netflix over online subscribers. Blockbuster launched its online service in August at a cost of $50 million, and said it would spend about $120 million this year as part of a plan to reach 2 million subscribers by the end of 2006.

This has to be great news for Netflix…

(via Kottke’s Remainders)