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Blockbuster is closing a fifth of its U.S. stores. The video's largest DVD rental service is gearing up for a hard stand against rapidly advancing competitors, Netflix and Redbox.  (Source: Norwood News)

Part of Blockbuster's fall has been due to the rise of Redbox, a kiosk rental service that has seized close to a sixth of the U.S. DVD rental market. The service's 18,000 kiosks offer 1-day DVD rentals at the bargain bin price of $1.  (Source: Rainy Day News)
Rental outlets are being killed by online content, vending machines, and mail rentals

Video juggernaut Blockbuster, long outmaneuvered and outsold competitors.  But the industry giant rocked the rental industry last week, when it announced that it would be closing 960 of its 5,000 U.S. stores.  Overnight Blockbuster, which also maintains 3,300 international stores, fell from a industry icon to a victim of a changing market in the minds of many.  The writing, however, has been on the wall for some time now.

Blockbuster is also changing some stores over to used DVD outlets.  In total its filing stated that as many as 1,335 to 1,560, mostly in the U.S. will close or be changed.

Blockbuster did get some good news.  Sources indicated Friday that it managed to raise more money that it had hoped for in a private debt offering.  The company, with the help of J.P. Morgan Chase, managed to secure $675M USD, when it only had expected $340M USD.  With those assets Blockbuster will be able to both pay off its $572M USD in maturing debt and carry out plans to open 2,000 rental kiosks by the end of the year, followed by a planned 7,500 more in 2010.

In the end, Blockbuster is still the market's biggest player, but it faces the danger of falling behind two leading competitors -- Redbox and Netflix -- as the market shifts.  Barry McCarthy, CFO of Netflix applauded his competitor's decision saying it was a smart move.  He stated, "Blockbuster has been battling a headwind trying to right-size their capital structure.  And it looks like they have made some important strides in making that happen. So congratulations for them."

Netflix, meanwhile continues to charge ahead.  The company is up to over 11 million subscribers and is forecasting third quarter earnings of $419M USD, up 23 percent from a year before.

Also enjoying new success is Redbox, a vending machine-style rental service that offers 1-day video rentals for $1 (customers pay $1/day for each additional day they rent it).  The company now has over 18,000 active kiosks, a 13.8 percent marketshare, and $344M USD in profit for the first two quarters of the year. 

Some studios -- Universal, Fox, and Warner Brothers -- are fighting the service, refusing to enter new-release distribution contracts with it for fear that its low prices will undercut their profits.  Redbox is suing them, and meanwhile is buying DVDs through retail channels to provide key new releases.  The company says this hiccup will do little to stop it, and that it expects sales to double by the end of the year.

Blockbuster's increased online presence can certainly combat Netflix, and its 10,000 kiosks will provide some challenge to Redbox.  But as it comes late to both of these games, the question remains whether it will be able to outcompete the younger rivals that currently dominate them.  Being king of chain video certainly brings Blockbuster much profit for the time being, but as the industry increasingly shifts towards mail rentals and vending, its ability to compete in these markets will be critical.

Other factors will play a critical impact on the future of the video distribution industry.  Executives at Google-owned YouTube are rumored to be in talks with executives from Lions Gate, Sony, Metro-Goldwyn-Mayer and Warner Bros over a distribution scheme that would stream $3.99 DVD-quality rentals over the video sharing service.  ITunes and Amazon already offering growing rental schemes.  And free video may be the greatest threat of all, with sites like Hulu using advertising revenue to pay for a plethora of streamed TV shows and select movies.

The Blockbuster shaking up is only the latest in this fast evolving market.  Rental video stores are slowly riding into the sunset, but clinging to part of the market.  They still lead the market and won't disappear overnight, but streamed rentals, kiosks, mail rentals, and free advertising-driven content seem poised to eventually eclipse the tried-and-true format.

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By BrandtTheMan on 9/21/2009 9:12:18 AM , Rating: 3
Also enjoying new success is Redbox, a vending machine-style rental service that offers 1-day video rentals for $1 (customers must return the video the next day or pay $25 to own it).

That is completely false. You can keep it for multiple days but you will be charged an extra $1 per day+tax. You don't have to pay $25 for the second day.

RE: False
By Hiawa23 on 9/21/2009 9:28:28 AM , Rating: 5
I have been a member of Netflix since day 1 & have not step foot in a Blockbuster for atleast 5 years. As I passed BB stores I wondered how do they make money with all the comp hey face with online, I guess I now know. Netflix is all I need.

RE: False
By FITCamaro on 9/21/2009 9:41:11 AM , Rating: 2
I only go to Blockbuster to rent games now. When Netflix starts renting video games, it'll be over for Blockbuster.

RE: False
By Hiawa23 on 9/21/2009 10:01:22 AM , Rating: 3
Gamefly has been awesome for me for games, as their keep it & store prices are unmatched, & Netflix is perfect with movies getting to me next day, so Blockbuster is not even on my radar.

RE: False
By corduroygt on 9/21/2009 10:30:45 AM , Rating: 2
I joined gamefly last week only to cancel it today with over 40 games in my Q and a lot were available now, and they failed to send me anything. If you want to play games for cheap, there is unfortunately no other option than flashing your dvd drive.

RE: False
By MrBlastman on 9/21/2009 10:59:36 AM , Rating: 5
Or waiting six months to a year for the price on the game you want to play to come down to a more affordable level.

Get a life. People work HARD to develop those games. A lot of them have families to feed and bills to pay. Many of the games might suck, but they aren't all stinkers and the good ones deserve your coin. The bad ones? Why bother wasting time playing the.

I'm in no hurry nor have been for a long time to buy games right when they come out. Sometimes I do it, but it is rare since I pay a high premium for them. I have a huge pipeline of games that I've bought that I still have not played through so as is I can easily afford to wait months before I buy a new one--and pay quite a bit less.

The key is though... pay. I'm being fair and equitable to the developers. There are many times where I'll pick one up on Steam's weekend deal where they are 50% off or more.

You don't have to pirate a game to get them on the cheap. Oh, correction, what you are doing is for free.

Also, with all the mod content out there (if you are a PC gamer), you can literally play for YEARS for "free" (after buying the parent game) with all the wonderful mod content available. I've been playing through the Freespace series as of late and enjoying every minute of it in Direct X 9+ graphical glory (it is Open GL but you get the idea, it looks amazing), full HOTAS support, Track IR head tracking etc. It is A-List, and I bought it it 10 years ago.

RE: False
By Cypherdude1 on 9/24/2009 2:09:40 AM , Rating: 2
I have been renting movies for many years, starting with VHS. I started renting from BlockBuster Online in 2005. I then tried Netflix in May, 2008, while still enrolled with BB. Both services are the same when it comes to receiving their shipped DVD's the next day. However, there are two big differences between the two:
1) Netflix is always one day faster, shipping the same day they receive the previously rented DVD. Netflix has a quick turnaround time. BB always waited until the next day to ship the next DVD. There is no valid reason why BB waits until the next day to ship their DVD's.

2) Netflix has a bigger inventory of DVD's which are immediately available, especially Premium cable series such as HBO's "John Adams" starring Paul Giamatti.

I quit BlockBuster Online after 1 month of trying Netflix. Out of curiosity, I logged into my dormant BB account and added "John Adams" to the BB Queue. It didn't say "Available" until weeks after I had already rented the entire series from Netflix. I have been with Netflix for over a year. I prefer using Netflix over going to a retail store or Redbox because all I need to do is add more titles to my Queue. When I'm done, all I need to do is drop them in the mail and wait for the next set to arrive. With Redbox, you must go to the store before it closes to return the DVD. Otherwise, you'll be charged for another day.

One interesting thing about Redbox which you may not know is you can reserve a DVD online before you go to the machine. Go to their website for this: . Online, you can also see which titles are available at each machine and which are out of stock. Each machine has an amazing 178 titles to choose from.

RE: False
By FITCamaro on 9/21/2009 10:47:53 AM , Rating: 2
The issue with gamefly though is its cost. If you don't have time to play the game, you're throwing away the $15 a month. I'd rather have merged service of movies + game rentals. I have the 3 movies at a time plan with Netflix. Would be nice if they offered games and 1 game = 2 movies out. Or even 1 game or 3 movies. That way I choose what I want.

RE: False
By kattanna on 9/21/2009 10:55:28 AM , Rating: 2
agreed. i just canceled the gamefly service because i simply dont play the consoles i have, Wii and 360, enough over my computer to warrant the extra cost. was a neat service though and if i was truly more of a console gamer, its an awesome service.

RE: False
By Jellodyne on 9/21/2009 5:12:18 PM , Rating: 2
Gamefly is dirt cheap compared to buying $60 games. We can agree that if you don't have time play games it's a terrible service to subscribe to.

It would be nice if there were a merged game/video service. There reason there's not is movies cost only $20 new, and there's not a huge classes of them with a 1 year shelf life (Madden, etc)

RE: False
By quiksilvr on 9/21/2009 9:52:16 PM , Rating: 2
If you don't have time to play that month, then just cancel the membership and start it up when you have the time. They don't charge you extra and the first month is 9 bucks. Only the months after are $16. IMO that's a pretty sweet deal for one game at a time as many as you want.

RE: False
By zerocool84 on 9/21/2009 7:40:41 PM , Rating: 2
I didn't like Gamefly at all. It took them 2 weeks to send me another game after I sent one back. I canceled right away but Netflix is always great.

RE: False
By Quijonsith on 9/21/2009 10:20:26 AM , Rating: 1
You're absolutely right. I won't pay the rediculous rates BlockBuster charges for movie rentals when I can use Netflix for one low monthly fee. Too bad Netflix doesn't rent games. I guess I'm stuck paying Blockbuster crazy cash for video game rentals.

If only some company would come out that rents video games the way Netflix rents movies...

I know, I shall start this genious company. I shall patent the idea of mail order video game rental and call the company..."GameFly"


Oh, wait...

RE: False
By callmeroy on 9/21/2009 12:26:35 PM , Rating: 2
I bought my condo that I live in now 8 years ago, there was a block buster down the street the whole time (well until recently) that I lived there. I think in those 8 years I rented maybe six times from them.

Now I used to buy DVDs there more than I rented (Best Buy kills them for buying movies as well -- but my nearest best buy is a 20 minute drive and is in a hectic shopping center, versus the block buster was a 10 minute drive in a much less congested area).

Well I have no option anymore -- must go to Best Buy for my movie purchases, my block buster that I passed by all the time for 8 years -- its done....its actually be re-born as a Dunkin Donut location...kind of funny if you knew my area...there's already about 6 DD's within a 2 mile radius of my house....

RE: False
By nafhan on 9/21/2009 10:09:35 AM , Rating: 2
Me too. I always seemed to be a day late returning Blockbuster movies. I'd end up paying over $20 a month to watch 2 or 3 movies. I could practically go to the theater at that price...
With Netflix I'm paying about $15 and watching about 6 DVD's a month plus the random "watch it now" movie or TV show.

RE: False
By nafhan on 9/21/2009 10:05:21 AM , Rating: 2
True. However, once you hit the 25 day/dollar mark, you get to keep the movie, and stop accruing charges. It's a nice business model that works for the company and makes sense to the consumer.

Personally, I think the Redbox selection is a little aggravating. On the rare occassion both of my Netflix movies are in the mail and I am in the mood to watch a movie, it seems like any movie I'm interested in seeing is checked out at all 8 or 9 Redbox kiosks within reasonable driving distance.

Not good
By damianrobertjones on 9/21/2009 9:22:58 AM , Rating: 2
Maybe we all need to stop watching the really naff copies that are flying around. After all, we could all pay for the products that people have put time into?? (This is directed at the people that don't rent or buy)

P.s. I read this article days ago on another web site?

RE: Not good
By StevoLincolnite on 9/21/2009 9:32:48 AM , Rating: 2
(This is directed at the people that don't rent or buy)

So it's directed at Pirates? Or those who don't watch movies at all?


Here in Australia, there are dozens of media companies taking court action over ISP's for allowing there users to download movies illegally, however those same companies have failed to take into consideration the medium on which the shift of movies are heading towards.

For instance, Netflix? Not available here.
Hulu? Not available here either.

I don't think there is any decent on-demand streaming movie service in Australia that has decent quality and availability of titles, thus in my opinion it's the movie companies that are at fault for having there movies pirated in the first place.
If they HAD them available online and readily available at a good price, you bet I would pay for it, it's all a big mess, and the movies companies really need to pull there fingers out of there *beep*, *beep*, *beep*!!!.

RE: Not good
By MrBlastman on 9/21/2009 11:05:24 AM , Rating: 1
Here's an idea--if you don't like it that there is no such service... START ONE!

That's right. With hard work and determination, you too can have a lot of money. That's a little better than just saying: "Well, they don't give me the option to stream online here, so rather than buying the DVD I'll just steal it instead."

Now, ask me if I support the RIAA and I'll quickly say NO. If the MPAA starts going sue crazy, I'll do the same thing that I've done with the RIAA--stop watching movies all together except for independent, non-MPAA labels.

RE: Not good
By xsilver on 9/21/2009 11:33:16 AM , Rating: 2
Australia doesnt have netflix but does have 2 clones. One of them run by our monopoly/isp/telephone/mobile carrier too.

Economies of scale just dont work for a small but geographically large country like australia.
But in this digital global environment, I think more work needs to be done on digital rights distribution between countries. Some of the rates of piracy of movies and tv shows can be attributed to distribution reasons rather than cost.
The consumer is unwilling to wait 8 weeks for a hot show/movie to be screened in the usa and some of them come out on dvd before even trailers are shown in countries like the UK and australia.

RE: Not good
By Taft12 on 9/21/2009 11:55:29 AM , Rating: 2
What the heck does "small (population) but geographically large" have to do with a discussion around digital distribution???

The reply before mine is a good little capitalist who means well when he says "start your own service if it doesn't exist", but that unfortunately means getting into bed with unethical groups and abandoning any notion of a free market.

RE: Not good
By xsilver on 9/21/2009 12:30:41 PM , Rating: 2
oh - the next post above the one I replied to talked about how netflix wasnt in australia - the small population / large geography/economies of scale explains that no?

But ultimately the argument always comes down to digital distribution and yes I agree how its a huge minefield but one that needs to be crossed ultimately.

RE: Not good
By sigmatau on 9/21/2009 3:26:34 PM , Rating: 2
I'm not sure what the other person was talking about either. The mail system in Australia is too expensive? That's all you basicaly need for a Netflix clone.

RE: Not good
By croc on 9/21/2009 6:22:00 PM , Rating: 2
And with the data caps we have in AUS, I doubt we will see a netflix-like service any time soon.

RE: Not good
By Golgatha on 9/21/2009 9:34:32 AM , Rating: 2
If you're referring to pirated copies, then yes, it would be nice to see the pirates putting money into the system. As far as being naff goes, the pirated versions are typically MPEG 4 recodes, 1:1 DVD rips, or 720p MKV files; all of which are equivalent or better than DVD quality.

Back on topic...

Blockbuster isn't even competing well in its meat and potatoes industry, which is the B&M rental store. My local Family Video is cheaper for all rental types, lets you keep the movies longer, and has better Blu-ray selection. They also have a bunch of free special interest (National Geographic documentaries, etc) and kids content (Ninja Turtles, etc). The final nail in the coffin was them pulling the no late fees promo this year. That and their obsession with being a retail outlet for new movies and AV gear. Like I really want to pay MSRP (or more than MSRP) for a Blu-ray movie, game, or the latest craptastic Chinese knockoff DVD player.

RE: Not good
By Hiawa23 on 9/21/2009 9:37:06 AM , Rating: 2
Maybe we all need to stop watching the really naff copies that are flying around. After all, we could all pay for the products that people have put time into?? (This is directed at the people that don't rent or buy)

P.s. I read this article days ago on another web site?

I get what you are saying but it's not up to me or anyone else to tell anyone elsewhat to do, buy or rent. There really is no need for me to buy when I have Netflix, & if I want a copy I could easily make a copy.

$3.99 streaming??
By Alphafox78 on 9/21/2009 10:12:40 AM , Rating: 2
I dont really understand why you would pay $4 to watch one streaming movie when you can get a netflix account for $8 a month and get unlimited streaming movies. I mean they dont have new releases streaming but you can get a couple of DVDs a week which are new releases via the mail. I suppose if you HAVE to watch a new release the day it comes out or something. Ill just got to redbox for $1 and watch it if thats the case tho.

I love how the studios blame pirace for everything when its really just compition thats driving down movie prices. plus who wants to spend $10.50 to watch a movie in a theatre when you can have a better movie experience at home??

RE: $3.99 streaming??
By kattanna on 9/21/2009 10:44:24 AM , Rating: 2
who wants to spend $10.50 to watch a movie in a theatre when you can have a better movie experience at home??

thats THE issue for me right there. i have a nice 56" tv at home where i can watch and enjoy movies and shows, in my shorts drinking a beer if i so choose. if i need to use the bathroom, i can hit pause. and the biggest plus.. i dont have to put up with other people walking in front of me, kicking the back of my chair.. talking, being on their phone..etc

sure.. i have to wait a couple/few months for the movies to hit DVD so netflix can then send it to me, but honestly.. most movies are not OMG i got to see that now quality,

DISH does allow me to "rent" newly released movies for like $2.99 for 24 hours.. but why pay per movie when i can wait just a little longer and watch it via my netflix monthly package.

plus with streaming.. there is usually compression artifacts to deal with and it doesnt look as good as the DVD upscaled, yet they want me to pay MORE for that??

RE: $3.99 streaming??
By Alphafox78 on 9/21/2009 11:03:07 AM , Rating: 2
exactly. 48" LCD with HTPC and netflix via media center ftw!

RE: $3.99 streaming??
By bubbastrangelove on 9/21/2009 3:21:43 PM , Rating: 2

Let's see, my choices are to be stuck in a movie theater with a bunch of strangers sitting in the equivalent of a comfortable lawn chair with the chatty couple on my right, miss "I can't go 2 minutes without my cell phone" in front of me and pop corn muncher to left.


Lie on my couch in my boxers and a tee shirt drinking a Guinness with a private bathroom, selection of reasonably priced snacks stop/play at my leisure on a 52" screen with kick ass surround sound while playing with my wifes boobs.


RE: $3.99 streaming??
By Alexstarfire on 9/21/2009 3:39:26 PM , Rating: 2
If we were all that lucky. Sounds like your place is a good place to watch movies at. Can I come over and get all the same amenities, including the wife's boobs? :D

By theapparition on 9/21/2009 12:12:22 PM , Rating: 2
Some studios -- Universal, Fox, and Warner Brothers -- are fighting the service, refusing to enter new-release distribution contracts with it for fear that its low prices will undercut their profits. Redbox is suing them, and meanwhile is buying DVDs through retail channels to provide key new releases . The company says this hiccup will do little to stop it, and that it expects sales to double by the end of the year.

Confused by this. I understand the distribution companies having issue with low prices, I understand them blocking new releases (don't agree with it, but understand).

The part I don't get is Redbox buying those movies from retail channels instead. Isn't that illegal? If I bought a DVD at a store, and charged my friends for borrowing it, I'm pretty sure that I'd be locked up, sued at the minimum. How is Redbox getting away with this?

Just curious.

RE: Huh?
By wempa on 9/21/2009 12:54:49 PM , Rating: 2
I'd like this clarified as well. It doesn't sound like that's illegal as long as they are all original copies. I know that with software, you can lend or sell software as long as you don't keep another copy of it.

RE: Huh?
By Alexstarfire on 9/21/2009 3:37:13 PM , Rating: 2
I'm pretty sure that's not illegal. I know for a fact that my local video store purchases their movies that they rent out compared to how blockbuster basically rents the movies they rent out to customers. Granted I know they aren't buying them at like the local Best Buy, but it should essentially be the same regardless of where it's actually purchased from.

store list
By tastyratz on 9/21/2009 11:27:37 AM , Rating: 2
so sad to see you go... oh well.
Anyone know which local stores took the hit? I want to go clearance shopping (unless the shelves are boxed and shipped back to corporate?)

RE: store list
By gplracer on 9/21/2009 11:35:58 AM , Rating: 3
Me too. I always seemed to be a day late returning Blockbuster movies. I'd end up paying over $20 a month to watch 2 or 3 movies. I could practically go to the theater at that price...

I pay $19.99 a month at Blockbuster. I get three in the mail and then the next day I take them to the store. They mail them back and they let me rent three more from the store while I am waiting on the next three in my quene to be shipped. Why would you pay $20 a month to watch 2 or 3?

Saw this coming
By mdogs444 on 9/21/2009 8:54:20 AM , Rating: 2
I have never used Redbox, and do not currently use Netflix (did at one point a few years back) but that is mostly because I don't have the time to sit around and watch movies. But even so, can't say that I didnt see this one coming.

$5 for a one night movie rental that you may or may not have time to take back before they charge you another $5? That's just for the dummies.

RE: Saw this coming
By AlexWade on 9/21/2009 9:45:12 AM , Rating: 2
I swore I would never visit a Blockbuster again after I was charged a late fee for being 1 minute late by their clock. When you treat your customers like dirt, they move on if they have a choice. I did, I went to Hollywood video and now to Netflix.

Not Far Enough
By Flunk on 9/21/2009 12:16:53 PM , Rating: 2
Blockbuster needs to evolve or die. The video rental business as Blockbuster runs it is dead, they need to switch to something else. Perhaps they could convert half of their remaining stores into electronics retailers or something else that actually has potential to make money.

RE: Not Far Enough
By gplracer on 9/21/2009 1:15:32 PM , Rating: 2
The best deal was when Blockbuster had a flat fee and let you checkout 3 movies at a time. I guess that was not profitable so they kept upping the price until everyone including myself decided to get off the plan. Having a local store is convienient. My kids sometimes want to watch a movie on Friday night and then another one on Saturday. This is hard to do when you are getting DVDs in the mail and you have kids who do not watch the same movie. Unfortunately the retail stores are having to charge too much to stay in business.

Redbox is going to get their butts chewed....
By Darkk on 9/22/2009 12:24:42 AM , Rating: 2
Some studios -- Universal, Fox, and Warner Brothers -- are fighting the service, refusing to enter new-release distribution contracts with it for fear that its low prices will undercut their profits. Redbox is suing them, and meanwhile is buying DVDs through retail channels to provide key new releases. The company says this hiccup will do little to stop it, and that it expects sales to double by the end of the year.

Redbox doesn't realize that they can't legally purchase RETAIL copies via normal retail channels of the DVD movies for rentals. The license for retail strictly forbids it.

Ever noticed when you get a rental movie it came with a very plain vanilla DVD labled "for Rental Only"...


Multiple licensing scheme sucks but it's there to protect everybody's interests.

By eddieroolz on 9/22/2009 1:43:49 PM , Rating: 2
Multiple licensing scheme sucks but it's there to protect MPAA's interests.

Fixed that for ya :D

How did they not see this coming?
By Finnkc on 9/21/2009 10:20:24 AM , Rating: 2
Ghee this Internets thing is really taking off Martha ...

I mean really ... is blockbuster run by my grandparents?

Blockbuster is about 10 years behind the times ... It's not like this happened over night ...

You know what
By jrollins006 on 9/21/2009 10:30:51 AM , Rating: 2
With all these BB's closing, universal and those others won't have a choice about putting new releases in Redbox and whatnot. If BB had prices like $1 a day they wouldn't be losing as many customers O.o

Buh Bye
By Genx87 on 9/21/2009 10:30:59 AM , Rating: 2
I have hated BB since the day they charged my Debit card 5 bucks for a late fee back in 1994. Ill smile the day they officially fold and go the way of the arcade.

I have the answer!
By btc909 on 9/21/2009 11:54:23 AM , Rating: 2

Let them die...
By iFX on 9/21/2009 5:37:42 PM , Rating: 2
I haven't been inside one of their stores in at least 5 years. They are a fee racket and I quit doing business with them.

So BB rents online too...
By scud133 on 9/21/2009 11:26:40 PM , Rating: 2
So I read all the way to the bottom and didn't see this anywhere...

Blockbuster *has* evolved already. They *have* an online rental service JUST like Netflix for cheaper -- you don't have to pay extra for blu-ray or anything.

Then when you're done, if you want to drop off the movie at a retail location (instead of mailing) they will send your next movie immediately, so you have an even quicker turnaround time. Some of their plans even offer a monthly allowance for in-store rentals, in addition to the mailed ones.

I don't understand why nobody seems to know about this... maybe BB needs to do a better job advertising the service?

Take a look at blockbuster dot com.

P.S. Netflix is cool too, just saying BB has the exact same service which nobody ever seems to acknowledge.

By swaaye on 9/22/2009 12:22:08 AM , Rating: 2
There's BlockBuster Online.

I tried that and Netflix together for a while. They are both good but Netflix gets the movies to me a bit faster. Prices are very similar.

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