Hacking NetFlix

How Important Is Getting New Releases on The DVD Release Date To You?

On the earnings webcast Netflix CEO Reed Hastings had the following to say about new releases: "For us most consumers are not sure if DVDs come 90 days after the theatrical release, 120 days, 150 days, 180, it is all over the map. It constantly changes not only between studios but also between specific releases. So there is not a high expectation of any perfect day when it is supposed to be out."

Netflix Complains to FCC About Potential Net Neutrality Loophole

Ars Technica reports that Netflix representatives visited the FCC to complain about a potential loophole in the FCC that could enable a broadband provider to charge more for Internet video or even degrade Netflix streaming:

"The fact that network operators control the delivery pipes and generate significant revenue from content that travels over those pipes provides both the means and motive for discriminating against new ventures that might threaten revenue sources of the network operators," Netflix warns. The filing worriedly mentions Comcast and Time Warner Cable's TV Everywhere ventures, in which cable subscribers will have access to content over the web, and the proposed merger of Comcast and NBC Universal.

Netflix is concerned about how the FCC interprets the managed services category, which could enable the discrimination.

Thanks to Josh for sending this in.

Netflix To Roll Out Streaming-Only International Service in Europe?

Reuters reports that Europe might be the first country to get a streaming-only offering.

Hastings declined to identify the market but hinted at how a roll-out might happen.
"The big market for Hollywood content (after the U.S.) is Europe...Third is Asia. Fourth is the rest of the world," Hastings told Reuters. "Canada is and was an option. It's sort of international-lite."
Since launching its U.S. streaming service in 2007, Netflix has focused on piggybacking on devices with a large installed bases -- Blu-ray DVD players, gaming consoles, PCs -- and the international service will start the same way, he said.

Why streaming-only? "We are a lot bigger when we enter and streaming means less operational complexity -- not having to figure out the mail for each country," he said."

In india the mail service is so unreliable they use couriers to pick up and deliver the DVDs.

Redbox Seeking Library Locations

Inside Redbox reports that Redbox is partnering with libraries to offer movie rentals, and Redbox will share 3% of rental income with the library.

Another library director, Leslie Burger from the Princeton, New Jersey district, says that Redbox can afford to stock many more copies of popular movies than the library can, freeing up funds to obtain TV series and obscure foreign films. Said Burger:  “It allows us to spend that money on things that Redbox doesn’t stock. . .  It has been a great decision [and it's] really been a win-win for everybody.”

I was at my local library last weekend and the DVD section was as busy as the local Blockbuster used to be (it's closed now), so this seems like a very smart move for the new-release driven kiosk company.

Netflix Made $1.7 Million on The Roku Investment

paidContent reports that Netflix made $1.7 million on the $6 million investment in Roku. "Asked about the sale, CEO Reed Hastings said the company “booked a gain pre-tax of about $1.7 million—after tax that translates to $1.035 million” on the deal. Netflix had reportedly invested about $6 million in Roku two years ago, so the sale appears to represent a 28 percent return (A spokesman said the company hadn’t disclosed exactly how much it sold its stake for)."

Netflix Stock Rises on Q4 Results & Amazon Rumors

Good Q4 results and renewed Amazon takeover rumors caused a jump in Netflix's stock price today, as NFLX hit an all-time high of almost $64 per share [chart via Yahoo!].

 

Netflix's market cap is now almost $3.5 billion. 

Note: I do not own stock in Netflix or any of the companies I write about (but on days like today I wish I did).

Netflix CEO Answers Analyst Questions During Earnings Webcast

During the Netflix Q4 earnings webcast, Netflix CEO Reed Hastings answered questions from the analysts:

When asked about the iPhone:

We haven’t yet done or submitted an iPhone application. We are optimistic that post the Google Voice brouhaha it would be approved. There is really no way of knowing in advance what Apple’s stance would be on that. Of course that application if it works on the iPhone it would work on the iPad. It is not a huge priority for us because we are so focused on the larger screen. Until we get our TV ubiquity and our Blue-ray ubiquity and we are getting close on video game ubiquity we would next turn to the small screen. It is just not a primary movie watching. It is something we will get around to but it is not in the near-term.

On competing for content with HBO, Starz & Showtime:

We are a distributor for Starz now. We would like to be for Showtime, HBO and Epics. That is the relationship that we want as opposed to trying to bid against them.

The reasoning behind the Warner Bros. deal:

The advantage to us in doing the deal is cost savings. Warner has given us a huge number of copies up to 29^th day at a very attractive price so we are able to fulfill all of the consumer demand and then we are able to use those savings to pour that into more streaming content.

Why they supported the Wii:

100% of the devices of WiFi include [inaudible] of the 26 million installed base 100% are addressable by Netflix. So we are very excited about that.

On the number of titles available for streaming:

I should have avoided publishing the 17,000 update because it gets everyone focused on title count and you can imagine we could quickly license if we wanted to 100,000 irrelevant titles. So you really don’t want to use title count as a proxy for attractiveness of the service. If we had 1,000 of the biggest titles that would make a much bigger difference than 10,000 others.

The biggest obstacle to getting new streaming content?

Money.

Hat tip to Seeking Alpha for posting a transcript of the Q&A session.

Netflix Q4 2009 Results: 12.3 Million Subs; $444.5 Million in Revenue

Netflix just released Q4 2009 results:

• 12.3 million subscribers, a net increase of more than 1 million new subscribers in Q4.
• $444.5 million in revenue, up slightly from Q3 2009. Total revenue for 2009 was $1.67 billion, up 22% over 2008.
• GAAP net income for Q4 was $30.9 million, and $115.9 million for the year.
• Subscriber acquisition cost declined to $25.23 for the quarter and $25.48 for the year.
• Churn was 3.9% for the quarter, down from 4.2% in Q4 2008.
• More than 48% of subscribers watched a streaming title in 2009, vs. 28% in 2008.

Outlook for 2010:

• 13.5 to 13.8 million subscribers in Q1, and 15.5 to 16.3 million subscribers in 2010.
• Revenue will increase to $490 - $496 million in Q1, and $2.05-$2.11 billion for the year.
• Q1 GAAP net income of $26 - $32 million, and $125 - $137 million for the year.

In the management commentary posted online, some interesting points:

• It took Netflix 4 years to reach 1 million subscribers, and they added 1 million in the fourth quarter of 2009.
• Netflix subscriber growth is now 31%, probably due to Netflix-ready devices and gaming consoles.
• While there will not be a postal increase this year, Netflix will still spend $600 million on postage, and expects that cost to grow to $800 million in a few years.
• Netflix signed or renewed streaming deals with Warner Bros., Sony, MGM, Paramount, The Disney Channel, and others in Q4.
• The first international launch later this year will be a streaming-only service in a single country, and will be used as a learning experience. My guess is Canada, but it could be England.

Be sure to tune in to the Webcast at 3pm PT at http://ir.netflix.com for a Q&A with management.

Netflix Earnings & Webcast Today

Just a reminder that Netflix will be releasing Q4 2009 earnings and hosting a webcast at 3pm PT today. This webcast should be interesting (Roku, growth, competition, Warner deal, etc.) and anyone can listen in at http://ir.netflix.com.

Apple will be hosting an event today to possibly probably launch a new tablet device, and Netflix CEO Reed Hastings said last September that they will support the iPhone eventually... Probably not today, but it would be great to watch Netflix streaming movies on the iPhone or a tablet.

Roku Seeks Funding and Considering IPO; 500,000 Players Sold; Netflix Sells Stake

Bloomberg reports that Roku is looking to raise $30 million and is considering a public offering next year. According to the story, Roku has already sold more than 500,000 Roku Players, and expects to do about $75 million in sales this year. Roku CEO Anthony Wood said has wants 100 channels and to give the Roku Player away -- he'll generate revenue by selling ads and subscription content.

The story also notes that Netflix has sold its $6 million stake in the company to Menlo Ventures, and might discuss the sale during the earnings call this week.

In related News, ZatzNotFunny has reports that one of the first "private" Roku channels is an adult channel called EroticVision.