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Why Netflix Took A Hit Today

What happened

Shares of Netflix (NASDAQ:NFLX) fell as much as 5.7% on Monday morning, but recovered to a 5.1% decline as of 2 p.m. EDT. The streaming video veteran’s stock price reacted to a report over the weekend that mighty retailer Walmart (NYSE:WMT) is planning to launch a rival video subscription service.

So what

On Saturday, The Wall Street Journal said that Walmart is in the planning stages of a video streaming service that would compete head-to-head with Netflix. The proposed service would seek to offer shows and movies reflecting the life, tastes, and values of Middle America, according to the Journal‘s anonymous sources. Premium cable industry veteran Mark Greenberg is leading the charge, which might result in lower monthly subscription fees than those of Netflix and Amazon (NASDAQ:AMZN) Prime Video. The article did not pin down a targeted launch date, though Walmart could reach a final decision as early as the end of this summer.

Now what

This is not the first time Walmart is taking direct aim at Netflix’s competing services. The retailer’s DVD-mailing service was closed down in 2005, sending its subscriber list of 100,000 names directly to Netflix. In recent years, Walmart’s digital video efforts have centered on Vudu, where consumers can buy or rent entertainment one title at a time.

So here’s another swing at Netflix’s proven success story, hoping to steal some market share by banking on Americana content and low subscription prices. I’m not holding my breath waiting for this move to kill Netflix and its billion-dollar investments in award-winning original content, but Netflix investors have been nervous since the company fell short of subscriber-growth targetsearlier this month. Today’s Walmart speculation just gave those exposed nerves another little shake.

source: fool.com

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