Uh Oh Netflix, Google Jumps in Your Space

Netflix, Amazon shareholders worry

By Scott Budman
|  Wednesday, Jan 20, 2010  |  Updated 5:44 PM PDT
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That sinking sound you're hearing is the stomachs of Netflix investors.  On a roll for the better part of a year, the Silicon Valley DVD rental giant just heard the news no company wants to hear:  Google is taking you on.

It's true:  Google confirms that it will dip a virtual toe into the movie rental business, via its YouTube video distribution service.  It plans to start on a very small level, giving viewers a chance to see certain movies from the upcoming Sundance Film Festival.  The rental opportunity will start on January 22nd.

This may be an early overreaction, but while shares of Google (GOOG) stock jumped after hours on the news, shares of Netflix (NFLX) took a bit of a tumble.  It's always tough to hear that a giant with the resources of Google wants to get into your business, but that seems to be the case.  After all, Netflix itself (along with Amazon.com) has shown that the video rental business is very lucrative, and Google is eager to find ways for YouTube to make more money.

Speaking of money, Google is not yet saying how much it will cost you to rent their movies.  It did, though, say that it will use its Google Checkout payment service, to take your money.

Is Netflix in trouble?  The guess here is no.  After all, not only is it way more established when it comes to renting movies, but it's already streaming more movies each day, though an increasing number of consumer devices.  Its innovation will keep it ahead.  But it will have to keep innovating, now that YouTube, and its billions of viewers, is entering the theatre.

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