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Netflix: Disc Rental Shipments to Decline in 2011

26 Jan, 2011 By: Chris Tribbey

Netflix CFO David Wells Jan. 26 acknowledged that the Los Gatos, Calif.-based online disc rental pioneer for the first time is projecting a decline in physical rental shipments for the full-year 2011.

Speaking in his first financial call since replacing departing CFO Barry McCarthy last month, Wells said that while disc shipments actually increased in the fourth quarter, they did so at lower rate than projected.

“This is the first time we have talked about [a shipment decline],” Wells said.

In a letter accompanying Netflix’s fourth-quarter financial results, the service said that should Blockbuster liquidate as Movie Gallery did in 2010, it might see a “modest boost” in disc shipments.

“We think the bulk of remaining video store customers will tend to visit kiosks and will get streaming from [us],” Netflix said in the letter. “Even though we expect DVD shipments to decline this year, we want to be clear that we intend to continue to offer great DVD-by-mail service for many years to come.”

When asked whether Netflix’s ongoing success has hurt Redbox, Netflix CEO Reed Hastings said the companies’ divergent business strategies — new releases versus catalog/streaming — makes that scenario unlikely.

“I’m pretty confident our success is not what is hurting Redbox,” Hastings said, adding that a speculated digital partnership with Redbox was “never that likely.”

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