Netflix DVD biz flies as VHS flutters

Discussion in 'DVD Video' started by Black Locust, Jan 12, 2004.

  1. Black Locust

    Black Locust Guest

    Online rental store sees higher-than-expected growth - By Meredith Amdur

    Who says the video rental business is slowing down? Online DVD rental
    shop Netflix saw its shares soar nearly 13% Wednesday to $50.49 when it
    upgraded its fourth-quarter subscriber forecasts, due to
    higher-than-expected growth for its subscription rental service. Netflix
    expects to have between 1.47 million and 1.495 million subs by the end
    of the fourth quarter, a slight improvement on its earlier projections
    of 1.425 million-1.475 million. Better yet, company said fewer customers
    are dropping out of the service, with average monthly subscriber churn
    of 4.7%-5%, compared to its earlier range of 4.9%-5.4%.

    Blame VHS

    The steady gains come as the overall market for video and DVD rentals
    fell 1.6% in the third quarter of 2003 compared with 2002, according to
    research by Alexander & Associates. However, the firm notes DVD rentals
    in October were up a whopping 83% compared with the same month a year
    ago, suggesting the real culprit is VHS, the part of the rental market
    still dominated by Blockbuster. Overall, Netflix predicted its revenues
    for the quarter will come in between $80 million and $82 million, up
    from earlier predictions of $77 million-$81 million. Excluding
    stock-based compensation, Netflix predicts a profit of $4.5 million-$6.5
    million, compared to $3 million-$6 million. Netflix customers pay $19.95
    per month for access to some 15,000 film titles, which they can keep as
    long as they like with a maximum of three moves out at any time. No late
    fees or shipping fees for returned discs are required. Netflix claims it
    can serve more than 80% of its subscribers with next-day delivery.

    Boosted by DVD boom

    Despite new competition from larger retailers like Blockbuster and
    Wal-Mart, pioneer Netflix seems to be holding its ground. According to
    Thomas Weisel Partners, Netflix is a major beneficiary of the continued
    boom in DVD players, spurred in part by low-cost units this holiday
    season. Netflix' addressable audience of U.S. television households
    could exceed 55% by year's end, noted Thomas Weisel analyst Gordon
    Hodge. He added that traffic to Netflix's site increased 71% in October
    to 5.3 million unique users. New rival services from Wal-Mart and
    Blockbuster "don't appear to be increasing their commitment to online
    marketing, according to our keyword-search analysis," Hodge said. He
    forecasts DVD penetration will hit 90% of U.S. TV households in 2005 and
    expects Netflix to continue to outpace the installed base growth.

    Black Locust, Jan 12, 2004
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