Toys“R”Us Moves into Online Video -- and Will Be Slaughtered

Some corporate decisions are so stupid when they are made that it staggers the mind. Toys“R”Us will get into the video streaming business, likely on the assumption that it can use its brand to get children to subscribe to toysrusmovies.com. But children will not be the ones spending the money. The parents who must make the decision to get the service already have access to plenty of video for youngsters on Netflix Inc. (NASDAQ: NFLX), Apple TV and cable system movie products. The battle among these companies already has thinned margins, as investors in Netflix can attest. A late entry into this business cannot hope to make money.

The first offering at the Netflix site is labeled “Just for Kids.” The section includes almost every child’s video imaginable, from Nickelodeon to “singalongs” and nature films.

Amazon’s Prime Instant Videos is part of the e-commerce company’s premium service, which includes free shipping of items bought from the firm. And, Amazon Prime costs only $79 a year, which translates into $6.58 a month — for the video service and all of the other benefits. Amazon Prime Instant Videos has plenty of movies and TV shows for children.

Then there is Apple TV. A subscription is $99 a year. As anyone would expect from Apple Inc. (NASDAQ: AAPL), the service is easy to use and its video library is huge.

Toys“R”Us believes that the power of these other brands, which are among the most well-regarded and well-known in the world, can somehow be overcome by a service that is no different from the others and relies on the Toys“R”Us brand. How could management delude itself into thinking that Toys“R”Us has any advantage against such a powerful slate of players?

Douglas A. McIntyre