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Netflix On Course

17 May, 2006 By: Jessica Wolf

Netflix can take on all comers in the changing entertainment climate, according to company executives.

The leading online rentailer is on track to meet both its subscriber and revenue growth projections for this year — 6.3 million and $32.5 million, respectively — said CEO Reed Hastings May 17 in the company's annual shareholder conference call.

And the company's focus continues to be on 20 million subscribers by 2010-12 and 50% year-over-year growth, he said.

Netflix already has an edge on any competition for the online DVD renter, he said, and has a new promotional partner with top DVD-seller Wal-Mart.

Netflix added nearly 700,000 new subscribers in the first quarter of 2006, compared to Blockbuster's 100,000 newly signed-up users, Hastings pointed out.

As for the growing digital download market, Netflix is ready for that too, he said.

The company always intended to evolve into a hybrid DVD-rental/download space, Hastings said.

But both the rental and sellthrough download market are incredibly small right now, and growing very slowly thanks to content licensing issues and the fact that movie-lovers want to watch movies on their television sets, not computers, Hastings said. Those are barriers Netflix will face just like sites Movielink.com and Cinemanow.com currently do.

In the meantime, Netflix fits right in with the digital consumer's mentality, Hastings said, using continued subscriber growth in the “digital Mecca” of the San Francisco bay area as an example.

In that area, net additions to Netflix's subscriber continue to accelerate, standing at 13.5% household penetration despite similarly high household ratios for broadband, Comcast and Tivo, Hastings said.

“That just shows how compatible Netflix is with the digital lifestyle,” he said.

For the time being, standard-definition DVD isn't going anywhere, Hastings said.

Netflix is high-def format-agnostic, he said, aside from the company's continued encouragement of the studios to release all content in both Blu-ray and HD DVD.

“It will take another 10 years to replace standard-definition DVD, just like DVD took 10 years to replace standard VHS,” Hastings said.

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