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Netflix is now a streaming company that mails DVDs  (Source: Nintendo)
Reed Hastings says Netflix is now a streaming company

Netflix is one of the main reasons that so much pressure was put on traditional video retail, ultimately leading to the bankruptcy filing of Blockbuster. Netflix has been changing its business model to keep up with consumer trends that are migrating from DVDs to streaming content.

Netflix offered up its financial data for Q3 2010 this week and the company is doing very well. During Q3 2010, Netflix added 1.9 million new subscribers bringing the total number of subscribers to the service up to 16.9 million. The 16.9 million figure is a gain of 52% from the same quarter of 2009. Netflix also stated in the earnings release that 2/3 of the customers of the service now stream content, up from 41% last year and 61% in Q2 2010.

Netflix grew its revenue significantly from $431 million in Q3 2009 to $553.2 million in Q3 2010 for a growth rate of 30% compared to last year. Interestingly, the number of DVDs that Netflix sent to users by mail declined in areas like San Francisco and grew overall by only 10% despite the significant amount of new users that signed up and the growth in revenue. That is a clear indication that more and more users are streaming content only. Netflix did note that it still spends more than $500 million to ship discs.

Netflix CEO Reed Hastings said, "We are very proud to announce that by every measure we are now a streaming company, which also offers DVD-by-mail. In Q4, we’ll spend more on streaming content than DVD content, and we’ll deliver many more hours of entertainment via streaming than on DVD. More impressively, a majority of our subs will watch more content streamed from Netflix than delivered by us on DVD. DVD-by-mail shipments are still growing, but streaming for us is much larger and growing much faster."

Hastings notes that the company is able to retain more customers thanks to word of mouth marketing by customers and high customer satisfaction. The cost to acquire a new subscriber dropped to $19.81 for Q3 2010 compared to $26.86 for Q3 2009. The huge growth in streaming use also lead to Hastings stating that streaming only subscriptions could be introduced this year. Netflix also plans to expand its service to more countries.

Netflix launched its streaming service in Canada in September marking its first venture outside America. AllThingsD reports that the earnings for the quarter were very close to Wall Street expectations with non-GAAP earnings of $0.70 on expectations of $0.71, missing the mark by a penny. However, Wall Street expected revenue of $551 million, which Netflix beat with $553 million.

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RE: Blah
By Micronite on 10/21/2010 11:19:02 AM , Rating: 5
You do realize that before the movie plays, the Netflix player determines the amount of bandwidth available to it and adjusts quality to compensate, don't you?

If you've got 4 people playing WoW when the movie starts, it's going to reduce the quality of the movie so it doesn't have to stop and buffer all the time. They try to make the experience seamless so you don't get frustrated.

But hey, I'm fine with you not watching streaming Netflix. The less you tie up the Akamai servers, the better for others.

RE: Blah
By Motoman on 10/21/10, Rating: -1
RE: Blah
By ArenaNinja on 10/21/2010 11:48:06 AM , Rating: 5
No... your statement was really poorly written. I thought the same as he did, then saw this post and re-read your original statement. It really is unclear.

RE: Blah
By Motoman on 10/21/10, Rating: -1
RE: Blah
By 2uantuM on 10/21/2010 12:09:18 PM , Rating: 4
No, not really. It's ambiguous.

RE: Blah
By rburnham on 10/21/2010 4:58:41 PM , Rating: 3
No, not really. You should have rephrased it.

RE: Blah
By roadhog1974 on 10/22/2010 4:24:29 AM , Rating: 2
He could have phrased it better but I got it ok.

neener neener.

"Nowadays you can buy a CPU cheaper than the CPU fan." -- Unnamed AMD executive
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