Netflix: The Best Is Still #1.

Discussion in 'DVD Video' started by One-Shot Scot, Jan 25, 2005.

  1. 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 8ยข 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
     
    One-Shot Scot, Jan 25, 2005
    #1
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  2. One-Shot Scot

    Matt Fuerst Guest

    > 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.


    I understand all the publicized action taking place at the 3-out-at-a-time
    level, that's where Netflix, BBV and Walmart seem to be publically dukiung
    it out.
    But, what seems like a relative simple chance for some revenue boost would
    be to lower the cost of the high end, 8 out at a time account. Charging $48,
    ~2.7 times the price of the 3 out at a time for ~2.7 times the movies is
    very linear. Shouldn't the overhead costs go down as the quanity goes up?

    I realize that the answer here is that the 8 out at a time market probably
    has far quicker turnaround time and in aggregate uses their accounts more
    than many of the 3 at a time people, some of which may be very casual
    renters.

    Anyways, here I am hoping for a nice price drop. At $40 I'd be in I think...
    I still can manage to go without Netflix on my 5 at a time account...

    Matt
    www.jackasscritics.com
     
    Matt Fuerst, Jan 25, 2005
    #2
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  3. One-Shot Scot wrote:

    > 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.


    Gee, could it be when they suddenly start to whine about not getting
    their titles overnight, anymore?

    Derek Janssen (...NAAAAHHH.)
     
    Derek Janssen, Jan 25, 2005
    #3
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