DVD-Software.info

[One-Shot Scot]

In paragraph #8, it is interesting to note that Blockbuster seems to be
cutting its own throat by competing with itself.

In paragraphs #10 & 11, the now-positive effect of reduced Netflix
customer usage is discussed.

*** *** ***

Netflix Doubles Income In Forth Quarter.
Subscriber count jumps 17% over previous quarter.

1. JAN. 24 | A price war and heated competition from Blockbuster.com
weren't enough to slow growth at online DVD rentailer Netflix. The
company said Monday that its fourth-quarter net income doubled to $4.8
million, or 8¢ a share, sending its stock up 15% in after-hours trading.
Net income included a $3 million loss on a U.K. launch that it put off
last year as competition picked up stateside.

2. Revenue was $143.9 million, a 77% jump over the previous year.

3. Netflix closed the quarter with 2.6 million subscribers, up 17%, over
the third quarter. The company expects to grow to between 2.85 million
and 3.05 million subscribers by the end of the first quarter and to 4
million subscribers by year-end, maintaining its lead in online rentals.

4. "No one should doubt our resolve to maintain our leadership in the
market we invented," CEO Reed Hastings told analysts, adding that while
Netflix had no current plans to cut its subscription fees, the company
would operate at a loss to fight off competitors if it was forced to.
"We do not intend to lose our leadership position," he said.

5. Netflix expects to lose money in the first quarter and for fiscal
2005 as it continues to fight to maintain its lead position and gain
subscribers.

6. Although the company said it has no plans to cut its price, if
Blockbuster were to slash its fees again or if Amazon.com entered the
market at a lower price point and subscriber growth slowed, the company
would react, Hastings and CFO Barry McCarthy said.

7. Netflix cut its price to $17.99 on Nov. 1 to head off increased
competition from Blockbuster and the expected entrance of Amazon in the
DVD rental space. In late December, Blockbuster cut its rates to $14.99
for its three-movie-out rental plan. Netflix has maintained its $17.99
price point.

8. While acknowledging that they seriously underestimated Blockbuster,
McCarthy predicted that the bricks-and-mortar chain will hurt its own
business with the lower price point by draining customers from its
stores and adding them to its online losses.

9. Netflix's lower price seems to have helped the rentailer hold onto
subscribers. Churn--subscribers leaving the service--dropped to 4.4% for
the most recent quarter, the company's lowest rate ever.

10. Meanwhile, subscriber usage rates are down, a trend that began
around the Olympics and has continued through to the current quarter.
Hastings said the company wasn't sure what is driving the trend, but
added that Netflix subscribers tend to lower their usage after 12 months
with the service.

11. Lower usage could be seen as good news for the company unless
subscribers drop the service. Netflix does better financially when
subscribers watch fewer movies because the company spends less in
shipping.

12. Subscriber acquisition costs were $35.61 per subscriber in the
latest quarter, compared to $32.89 the previous year. Netflix said in
July it would spend more on SAC in the face of new competition.

13. Netflix now believes that the online DVD rental market has the
potential to reach 20% of U.S. households. In the Bay Area, where
Netflix first began operating five years ago, penetration has reached
9%. U.S. penetration reached 2.3% in 2004.

14. In 2005, Netflix will spend between $7 million and $14 million on
infrastructure costs as it begins offering subscribers online movie
downloads. Netflix said that does not include content costs to license
films for download from studios. The company said it wouldn't divulge
details on its download plans until they are ready for consumer launch.

15. During the first quarter, Netflix expects to report a net loss
between $16 million and $19 million with revenue between $149 million
and $154 million. The company expects to be back in the black for the
remaining three quarters. For 2005, the company is targeting a net loss
between $5 million and $15 million.


http://www.videobusiness.com/article.asp?articleID=9671&catType=NEWS

[Matt Fuerst]

[Derek Janssen]

One-Shot Scot wrote: