Netflix is synonymous with online DVD rental, but its pioneer status hasn't been much help in fending off ferocious competition Stateside. On worse than expected US figures, stock crashed by 35 per cent and the company said it's cutting fees and delaying its UK launch. All this despite turning in its best ever profit: $22.6m after adjustments, on revenue of $141.6m.

Blockbuster's entry into Netflix market was the catalyst for the changes, with Netflix reporting higher than expected churn. But a lack of a long-term competitive strategy hasn't helped either. Netflix hiked its basic monthly fee (for three DVDs at a time) by $2 to $22 in July, but yesterdays' cut takes it down to $18. The cost of acquiring a subscriber has risen by five dollars over the past year: to almost $37.

In anticipation of Netflix's debut, some of the UK biggest online DVD rental companies have merged, with Movietrak and Qflicks tying the knot in July, followed by Screen Select and Digital Island in August.®

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