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Netflix: Blu-ray Adoption ‘Remarkably Strong’

9 Dec, 2008 By: Erik Gruenwedel

Barry McCarthy, CFO of online DVD rental pioneer Netflix, told an investor group Dec. 9 subscriber requests for Blu-ray had already exceeded the company’s year-end goal of 500,000 members willing to pay an additional $1 per month for BD movies.

The announcement comes as the Los Gatos, Calif.-based service said it intends to reach 9 million subscribers by the end of the year, and buck current economic trends by increasing marketing expenditures.

“The economy has very much been our friend,” McCarthy said. “We are having a remarkably strong quarter. We are sitting at the Wal-Mart end of the spectrum.”

The CFO said Netflix nonetheless continued scale back on employee costs, which involved cutting 50 technical specialist positions. Conversely, Netflix said it is expanding its customer service group, according to spokesperson Steve Swasey.

McCarthy said Netflix would increase marketing spending 20% more than previously budgeted because the business model was “working so well.” He admitted that the number of new subscribers coming to the service just for streaming was “embryonic” but getting better.

Piper Jaffray analyst Michael Olson concurred, believing Netflix has been overly conservative regarding its financial estimates and doomsday scenarios.

“At the very least, we believe estimates have been revised down to the point where numbers more than reflect any impact from slowing consumer spending,” Olson wrote in a research note.

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