Netflix Ends Q4 with 24.4 Million Subscribers

Netflix Q4 results:

• Netflix ended Q4 with $876 million in revenue, and $41 million in income after taxes.
• 610,000 new subscribers were added in Q4.
• 21.67 million streaming subscribers in the U.S. and 1.9 million internationally.
• DVD subscribers declined to 11.2 million, and Netflix ended the quarter with 24.4 million total subscribers.
• Netflix ended the quarter with $798 million in cash and equivalents. 

Q1 Guidance:

• 22.8 to 23.6 million streaming subscribers, $496 to $511 millon in revenue.
• 2.5 to 3.1 million international streaming subscribers, $38 to $44 million in revenue (loss of $118 to $108 million).
• 9.4 to 10.0 million DVD subscribers, $308 to $322 million in revenue.
• Global loss $27 to $9 million.

Some interesting tidbits from the Q4 report:

• Netflix will get The Adventures of Tin TIn, Hugo, and Rango in 2012 as part of the Epix deal, and Thor, Transformers 3, Captain America, Super 8, Immortals and Footloose from other deals.
• The remaining Starz titles will be removed at the end of February, but they only account for about 2% of viewing.
• Netflix customers are streaming about 30 hours per month on average.

Update: From the Netflix investor Q&A session:

• Netflix is doubling spending on streaming content over last year.
• Netflix is not bidding on current seasons of any TV shows.
• Hastings described TV viewing on Netflix as "binge" viewing of older seasons of shows.
• Hastings believes that offering new releases on a pay per view basis would dilute the brand and be a negative.
• Piracy in markets impacts the pricing of content, as does competition.
• Netflix has some 3D Blu-ray titles, and is considering 3D streaming titles.
• Hastings says that they have no plans to offer video games now.
• The profit contribution of a streaming customer is about double that of a DVD customer, so Netflix would prefer to add streaming customers.
• About 8.4 million subscribers use both DVD and streaming, and that number is declining.
• Smart TVs are Netflix's fastest growing device category. 

Comments

[George Isaacs]

Netflix is going down the tuuuubes, maaan! Wait. They aren't? Huh. How about that?

[Russ]

So are those all te big name titles for this year? I hope there is some more, and some more deals on the horizon!

[corq]

Netflix is about the only leverage right now that cosumers have in studios 'deciding what we should pay'. Netflix misstepped, took the brunt (deservedly).

However, until true competition to Netflix emerges with really competitive content deals and has an app for every known device on the planet, there really isn't a whole lot else, Redbox has a ways to go, but right now netflix is still a deal compared to even basic cable. So I get all the stomache upset over the fee hike fiasco, but its saved me serious money on my cable bill for almost three years now.

Competition to netflix will only make that better. So far, however, all I hear there is crickets.

[Satorical]

Anyone who thinks the subscriber losses were just about the fee hike didn't pay attention. It was mainly about a cavalier attitude toward customers, and had been a long time coming as popular features and responsive customer service were jettisoned.

For more on how to disdain customers until they leave, see Blockbuster, ca. 2004.

[moviegeek]

So basically Hastings is going to let discs die a slow painful death and not rent video games like he promised.

[David]

Until they are able to provide their full DVD catalog as a streaming catalog and WITH SUBTITLES.

I will always be a DVD subscriber.

As a member of the deaf community, subtitles are the NUMBER ONE deciding factor in whether or not I will be able to watch a film.

Please, please, please provide more than 70 or so streaming films/TV shows combined with subtitles.

Please netflix. I love movies. I'm begging you.

[Karen Lee]

Vastly different take on the DVD rental profit contribution number vs streaming profit contribution from the material available before. That prior material showed DVD rentals to be extremely profitable and streaming much less so.

Unfortunately Netflix seems to think DVD by mail just isn't 'sexy' enough an image.

Apparently they feel streaming is.

I don't stream, won't stream because my download speed is so bad with Verizon that the stream is constantly buffering. I'm a DVD by mail customer. I like the older movies, feel most new stuff is either remakes which aren't as good as the originals were, or are things I am just not interested in seeing. They can delay new release rentals for a year, for all I care. I won't buy something I've not been able to see all the way through first. Especially not the new releases coming out these days.

I have noticed a dearth of new DVD's lately and have been receiving cracked DVD's again. One of them was a second disc of a two disc series. I got two in a row of that disc cracked from the center to the edge. The third disc was good. Someone either isn't watching or doesn't care. A customer will never know which is the case.

[velvetjesus]

Hey David, there's actually over 1,300 titles available with subtitles for instant streaming. http://instantwatcher.com/genres/522

[IMACynic]

Time for someone to step up and provide a new, decent disc-by-mail service (no, BB Online doesn't qualify). Netflix can't wait to be streaming only and their disc service will continue to steadily head downhill until they can convince the remaining disc customers to leave.

Yes, streaming can be more convenient (when it works as it should), but discs are the last quality medium that is carried on the shoulders of the First Sale Doctrine and allows for inexpensive rental of new, quality titles.

When Netflix finally goes streaming only, I most likely will still be a subscriber (unless Reed ruins that too, drives the company into the ground or someone else provides a better service), but it will forever be an "extra" source of entertainment. I can't see Reed's vision of Netflix as a streaming service being a primary go-to place for entertainment. It's good as a snack, but not the main course.

[Galagatron]

IMACynic, you're right about Blockbuster not qualifying as a decent disc-by-mail service. I had it until a few years ago, with Netflix, and just started a free trial to get a few movies not on Netflix. The search is misleading--shows discs as available until they are in the queue--and they take forever to get mailed and processed, just like in 2008.

[moviegeek]

I also expect more Netflix disc shipping centers to close this year to save money, BB by-mail share is dwindling and I expect Dish to close centers as well.

[Blackberry Mobile Price List]

I m so fortunate to read your blog. I learned a lot of new things.

[Nate]

I watch probably 80% of my Netflix streaming via my LG Smart TV. I never have issues and the interface is slick and easy to use. So in 2012 we're getting: The Adventures of Tin Tin, Hugo, and Rango as part of the Epix deal, and Thor, Transformers 3, Captain America, Super 8, Immortals and Footloose. Not listed but should be coming: The Lincoln Lawyer & Everything Must Go (EPIX). Those are some more mainstream titles that should make folks happy. It's currently bombing but 'Haywire' might also hit before the end of the year (maybe). 'The Innkeepers' & 'Goon' should be showing up very soon. I like it.. I like it a lot. That's this year and starting early 2013 we will get Dreamworks Animation Catalog & New Titles. Not quite the new release every Saturday night that HBO does, but then again it's half the price of HBO and you don't have to pay for cable/sat either.

[Jamie]

There's not going to be a new dvd by mail service to come along. The market is moving to the kiosk business now, so the biggest winner in that is Redbox.

[haha]

i can't even explain the sorrow i feel for everyone that posts who says they don't stream

it's amazing

[frank22]

The video market was about the newer movies and cable shows like Saprano's. This is kept the video stores crowded every weekend night. Netflix helped to destroy it, and now they are turning themselves away from that very market. Streaming these types of shows is often more expensive than what the rentals at many video shops were, and much more expensive than Netflix. There does not seem to be a reasonable alternative out there except for Netflix DVD. They seem to be turning customers away from the biggest market.

The margins on streaming show that they could do new releases for lower prices than what it costs to get DVD by mail and make much more money. It could be devised somehow that the producers make the same or more.

[James Heartney]

Hastings knows that DVD By Mail is a business model in decline, and is adapting the company to coming changes. It's a cliche, but it's also the truth - streaming is the future.

One huge advantage streaming has (aside from better profit margins and actual growth potential) is that technically, it's not frozen in place. Given that a streaming service can query customers and provide the correct stream type for their hardware, streaming can add capabilities, codecs and features in a way disks and broadcast can't. Eventually customers will have fiber connections many times the speed of current DSL or cable setups, and when that happens you'll get blu-ray quality streams and 3D (if it's still around).

People begging for a Netflix competitor don't seem to grasp how much of a lead the company has. To succeed in this, you need a whole set of pieces (viable library, apps on most appropriate devices, streaming infrastructure, customer base) that are really hard to build once there's a strong incumbent.

All the recent talk of decline at Netflix was incredibly stupid, and going forward, we'll see why.

[Chuck]

My main worry is Netflix possibly turning away from Blu-ray and discs altogether. Blu-ray is and will be the main source of my movie watching. It is unmatched.

I wish they would get any Criterion Blu's as getting Criterion was one of the main reasons I became a subscriber.

[foryourhealth]

Streaming only?? With the current catalog, I don't think so.

[Chris]

What was written here makes a lot of sense. Streaming is the goal since, if I read this correctly, that is their most profitable customer.

From a consumer standpoint though the goal of this product is to be a online version of FX, TBS or TVLand ... that is to show non new release TV shows to the masses at a cheap price point. That is what this is.

For those of us who are looking for more premium content I wish there was a competitor or this product was for us. I know the studios want a pay per view model for recent movies and are the ones calling the shots. I wish NF had an alternative streaming product to address that need at a higher price point (but not PPV). For those of us that don't care about HD (which requires a disc) that would be very nice. I love the ability to steam to anything. I hope they get a more expensive flat rate movie steaming tier at some point. I'd sign up in a second if it was competitive with other pay channels. For now I will have to settle with Redbox for weekend movies and Amazon Prime for my instant secondary (non new release on demand) content.

[MikeT]

I am a DVD and streaming customer, but when I look at my two queues, I see about 5% streaming only; 20% both streaming and DVD, and 75% DVD only. Bottom line: I can do without streaming, but I can't do without DVD.

I have a free subscription to BB now through Dish Network, and I disagree with the others who say it's not viable. BB service is inferior to Netflix, true, but they have the distribution centers and they have the titles. If Netflix continues to drop DVD titles faster than they add them, BB will emerge as the better choice. It's up to Netflix, really.

[ts]

"Netflix is not bidding on current seasons of any TV shows."

I don't like the sound of that. I'm not quite sure what it means though. Will they bid on them next year when they aren't 'current'? NF offers past seasons of several programs that are still on TV: How I Met Your Mother, White Collar, Bones, Sherlock Holmes, Walking Dead, Justified to name a few. Are they no longer going to bid for upcoming seasons? I don't see why they would do that but if they did I might have to reevaluate. Still a fan of NF streaming but not if they stop offering what I want.

[cyber610]

Just wait till they increase the price of streaming 60% or more cause the dvd part is slowing down

[paul]

It's interesting that starz "only account[s] for about 2% of viewing"... I mean, the implication that 2% of viewing is small seems strange. Netfliix's subscriber base increased by about 3% this quater. Someone on here mentioned subtitles, but I'd guess that fewer than 2% of US subscribers use them (for English language movies). And of course most (if not all) streaming titles will be watched by far fewer than 2% of Netflix's subscribers. If Netflix is trying to say that it's ok to let starz go because only about 2% of their streaming is starz, well, there's a whole lot more that they can get rid of with that same reasoning.

[haha]

"Just wait till they increase the price of streaming 60% or more cause the dvd part is slowing down"

I would welcome this

cut off all you people living in 2001 and spend more money on streaming content

[danny hicks]

so do i thats the begging it only the first month and they are adding all thoses cool

[Marshall]

5.1 audio on HTPC please.

[George Isaacs]

" If Netflix is trying to say that it's ok to let starz go because only about 2% of their streaming is starz, well, there's a whole lot more that they can get rid of with that same reasoning."

Umm. Let's not forget that Starz was let go because they insisted that Netflix raise our prices to reflect the premium-ness of their content (rather than asking for a bajillion more dollars which would'a made *some* sense). Anybody who agrees with their position can actually subscribe to their service...at a premium. Weren't they streaming video before Netflix? Is that still happening?

So, yeah. The same reasoning could apply to other content.

[Chris]

Boo on the retraction for offering gaming. What, did that idea only make sense when NF was shuttering the "by-mail' division? So now that NF was forced (via consumer outcry) to keep the less profitable dvd business, they won't offer the games? Funny.

NF is forced to keep the by-mail business until it can figure out a way to kill it off. NF is "Gus" from Breaking Bad, and the by-mail business is "Walt." Reed Hastings would be well advised to watch the show to see what happens to Gus's attempts on Walt.

[James Heartney]

ts, they're not saying they won't be getting new seasons of those TV shows in future; all it means is you won't be seeing the current season concurrently with it airing. The current seasons will show up on Netflix next year, when new seasons are airing.

Essentially, this just means they're not going head-to-head with Hulu for currently-airing programming. Wise, I think; even assuming they could get rights, it would chew up too much of their acquisition budget.

[Bob]

Two points:

1) For those wondering about an alternative DVD-by-mail service, check out Greencine. They are much smaller than Netflix, and (I am guessing) are trying to differentiate themselves by offering more indie/offbeat/alternative content. They are only based in the west coast, so shipping times increase the further east you live. However, they've been around for several years, and are still alive and kicking. I'm not a Greencine customer, but might become one if Netflix neglects their DVD-by-mail business.

2) The people who love streaming and hate DVD-by-mail don't care about quality, or at least are willing to sacrifice quality for convenience. Even HD content is seriously compressed when streamed, except for the expensive VUDU HDX. Even VUDU HDX isn't as high quality as Blu-Ray, and obviously requires more buffering time than lower-quality content.

[Nate]

I can see why people like the DVD side of it, I just hope they are prepared for the service to have it's legs cut out from under it by the USPS. It's coming, not a matter of if but when.

[Mrmanmac]

Give it time people..... Netflix has already shaken the the TV industry to its core in just the past two years since streaming really took off. This is the equivalent of Shock and Awe to the powers that be, and they are expanding at an unbelievable pace. It wont be long before many of our wishes come true, but we have to be patient. Too many of us are expecting way too much, way too fast, and want it way to cheaply.

[haha]

" Even HD content is seriously compressed when streamed, except for the expensive VUDU HDX. Even VUDU HDX isn't as high quality as Blu-Ray, and obviously requires more buffering time than lower-quality content."

perhaps it's not that we don't care about quality. it's that the upgrade in quality from streaming HD to blu-ray isn't that large or necessary unless you're on a 60+ incher

overkill much? Ease of use trumps such a minimal quality upgrade

priorities my friend, and having access to the number of series that netflix provides at the click of a button is well worth the small quality downgrade

[Bob]

"it's that the upgrade in quality from streaming HD to blu-ray isn't that large or necessary unless you're on a 60+ incher"

If you are talking about VUDU HDX vs. Blu-Ray, I agree that the quality difference is less of a factor. (The cost of an HDX film is another matter, but that's a different discussion.) However, Blu-Ray vs. heavily compressed HD...I wouldn't call it a "minimal quality downgrade" unless you're watching older movies or ones in which special effects are a non-issue...of course, that eliminates most of the modern-day Hollywood "blockbusters."

Regarding the 60" TV: it's as much about how close you sit to the TV as the size of the TV.

[Mike]

"I have a free subscription to BB now through Dish Network"

Please tell me how I can pay a reasonable price for BB subscription service - without a dish network subscription. Satellite may be great, but it does not work through my neighbors trees and his 3 story house.

[Quiet Desperation]

I'm living in 2001 because I still get DVDs? Is that supposed to be on the same planet as logic?

I'd love to just stream everything, but 80% of what I want to watch is not streamable. Anywhere. So, Mr. 2012, what do I do? Huh? C'mon FutureBoy, what's the answer? How do I stream the unstreamable? If the disc is so dead, how does streaming meet my desires? Note: torrents don't count as streaming.

What is worse is that, instead of converging on single subscription services that can stream all known content, the content creators seem keen on providing their own streaming. So I'll have to get an HBO subscription, and a Starz subscription, and eight more subscriptions over there. No thanks. Eff that scene.

So, yeah, technologically streaming is awesome. The way the market is going, however, sucks many asses.

[Chris]

I'll be happy to come back when recent movies come on board online. What we have here is a great delivery mechanism (for non-hd) on Android, I-devices, home streaming devices, game consoles and of course PC's with uncompetive content compared to disk or kiosk to put through those outlets.

I think NF has thrown in the towel with trying to stream recent movies. Their report sure says that. Why can't they have more than one streaming tier instead of clinging to the $7.99. Or even if they gave the $7.99 people a limit of x new releases per month. That would even be reasonable. That would be neat so see.

[Galagatron]

NPR had a story about the 24.4 million subscribers, pointing out a lot of people are using their free trials they started at Christmas, either from gift subscriptions or from their new Netflix-capable gadgets. Though Netflix has a high retention rate, we'll see how many of those stick around.

I can't wait for Netflix to raise the price of the streaming so the $8 streaming-only crowd can cry about that. It is inevitable.

If the disc is "dead", then why is the industry hawking Blu Ray like crazy? The only thing that bothers me about discs is having to sometimes go out of the way (which isn't really much) to get them to a mailbox). I have over 100 selections in my disc queue and less than five are also available for streaming. I don't just want to watch something, I want to see it in the clarity as intended. I'm not going to watch a visual feast like "Hugo" or even "Edward Scissorhands" through streaming. In fact, I'm going to buy "Edward Scissorhands" on DVD.
Sorry if newcomers who just want to stream whole seasons of whatever trending TV show before they ditch the service after a short while feel "bogged down" by those of us when went to Netflix six years ago or more for the purpose of renting rare stuff not to be found on the Blockbuster shelf.

[danny hicks]

i hope netflix stays as long as it has in the states cause i wouldnt know what to do formyself