Netflix sparks price war with UK launch

Mon Jan 9, 2012 10:50am EST
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By Georgina Prodhan and Matt Cowan

LONDON (Reuters) - Netflix launched in Britain and Ireland on Monday, taking on BSkyB's premium drama and movies offerings and prompting Amazon-owned rival Lovefilm to offer a new cut-price service.

In its first expansion outside the Americas, which the company has said will push it into a loss this year, Netflix said its prices and instant access to a broad range of online entertainment would attract new customers.

Lovefilm, which has 2 million customers in its core British market, immediately announced Lovefilm Instant -- an internet streaming-only offer to undercut Netflix -- in addition to its current offer that combines streaming and DVD rental by post.

Netflix shares rose 2.4 percent to $88.33 by 1516 GMT, while the Nasdaq was barely changed. Amazon shares fell 0.9 percent to $181.01.

"People are excited about the UK launch even though it had been in the works for some time," said Daniel Ernst, of Hudson Square Research.

Netflix Chief Executive Reed Hastings told Reuters in an interview that BSkyB would be its main competition.

"Lovefilm is not the enemy. When you talk about big entertainment businesses, Sky Atlantic and Sky Movies are huge, and our advantage is we are much lower priced than the Sky packages, and it is all on demand -- click and watch," he said.

Netflix is trying to recover from the roughest patch in its history after alienating U.S. customers with a 60 percent price rise in the third quarter in an attempt to cover the increasing costs of buying TV and film content.   Continued...