Rich Fiscus
20 Oct 2008 23:12
Despite the spectre of a recession looming over the US economy, Netflix Founder, Chairman, and CEO Reed Hastings is confident about his company's position for the remainder of the year. Although he sees slower growth than last year he predicts that recent and future developments will continue to fuel profitability.
One of things Hastings spoke proudly about in a presentation that was part of the company's third quarter earnings conference call today was the deal struck recently with the Starz premium cable network. Starz opted to close their Vongo service, choosing instead to let Netflix provide internet delivery for them.
He pointed out that one of the biggest stumbling blocks for providing such services is the contracts the big networks have that tie up major studio content, adding "With this new model we think we can generate increased profit for Starz, increased profits for Netflix, and over time for the studios."
He also spoke extensively about innovations that are around the corner for the Netflix streaming service. The previous quarter saw the introduction of the first Blu-ray player that can be used to stream movies from Netflix, LG's BD 300. He also hinted at additional players with Netflix support coming in the future, saying "we'll announce more Blu-ray partnerships as they're ready for consumers."
But the company isn't planning to ignore people who prefer to watch on a computer. In fact he indicated an important innovation in the form of support for Intel-based Macs. "This quarter we'll begin the rollout of our second generation player software which runs on both Windows and Intel Macs," he said. "It's a huge step forward for online video players and we'll be announcing the details shortly."
And what about their core business of DVD rentals? His predictions were slightly less rosy there, but he still believes the company will continue to do well, even during the hard economic times its customers face right now.
He said "It now appears that the recession means continued subscriber growth for Netflix, but not as fast as last year. This quarter to date our net adds are positive. In other words we are growing. But our net adds so far this quarter are about 30% less than 1 year ago."
He's counting on revenue from the company's Blu-ray program to help those profits. He predicts about half a million customers will opt in for Blu-ray access, which will mean an extra $1 per month in exchange for access to discs in the hi-def format.
He also sees growth in that market as player prices fall below $300, which he seems to feel is an important price to stimulate additional sales.