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Online DVD site Netflix has enjoyed its online niche for five years without much interference. Under Chief Marketing Officer Leslie Kilgore, members paid $22 a month to choose from 25,000 films, received free delivery and kept the movies as long as they liked. The strategy helped Netflix increase its share of the rental market from 8% of all movies rented in the fourth quarter of 2003 to 12.5% in the second quarter of 2004.

Things are about to get interesting for the dot-com movie site. Blockbuster, which has 40% of the rental market, recently said it was entering the online DVD rental market, and has been there a year. Netflix is still No. 1 online, though, and analysts say that position is not likely to slip, even in the face of lighter-than-expected net income in the second quarter and marketing expenses expected to head north.

"Having new competition in the space validates the service we offer," says Ms. Kilgore, 39, who adds that the site has 2 million members and 80% customer growth. Ms. Kilgore says Netflix set out to have a ubiquitous Internet presence, blanketing the Web with banner ads. It's also done promotions in DVD player packaging, in-store promotions at Best Buy, as well as TV commercials that broke this year from Omnicom Group's Goodby, Silverstein & Partners, San Francisco.

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