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Netflix CFO: Game Platforms Key to Streaming Growth

9 Sep, 2009 By: Erik Gruenwedel

Netflix is targeting video game systems to help build its burgeoning movie streaming service, CFO Barry McCarthy Sept. 9 told an investor group.

Speaking at the 2009 Citi Technology confab in New York, McCarthy said the online DVD rental pioneer’s fundamentals have remained strong during the recession.

He said the growth of the Watch Instantly streaming service would continue to help boost the business for the foreseeable future.

The CFO said delivery of movies via Blu-ray players and Internet-connected HDTVs would take longer than video game systems as consumer adoption of the distribution channels slowly expands.

The executive said the majority of BD players and Web-enabled TVs are purchased during the winter holiday, which he said could involve as many as five winter holiday cycles to achieve a consumer installed base comparable to video game systems.

“The video game market place has the largest install base of platforms that are successful with delivery of Internet-based video content,” McCarthy said. “Over time as consumers buy Blu-ray players and TV sets that have full-Web browsing capability, the install base of those platforms will grow also.”

Netflix currently offers movies streams to subscribers via the Xbox 360. McCarthy said he would like to strike distribution deals with Sony’s PlayStation 3 and other systems.

McCarthy said the primary deterrent to acquiring newer-release content for streaming is licensing costs, which he said would require upping spending by 15% to 20%.

“It’s just about money,” he said.

McCarthy said Netflix continued to see “traction” in streaming, which he said affected subscriber growth, the cost of sub growth, gross margin and profit growth (expected to exceed 30% this year, according to the CFO).

“Streaming has broader appeal because you don’t have to wait for DVD by mail,” McCarthy said.

He the company has been able to re-sign about 30% of former subscribers through streaming, which McCarthy said negated claims by some that Netflix would eventually run out of potential new subs.

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