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Netflix Primed for High-Def Introduction

28 Feb, 2006 By: Holly J. Wagner

Netflix won't feel any pain in introducing high definition formats because it can ease into the transition, CEO Reed Hastings told analysts Feb. 28.

“Instead of getting 100,000 copies of a title, we'll get 98,000 in standard definition, 1,000 in HD and 1,000 in Blu-ray,” he said, so the higher cost won't really hit the bottom line.

Hastings predicted that both HD DVD and Blu-ray formats will come to and stay in the market.

“It has become an extension of the video game wars and Microsoft is unwilling to back down because of the video game implications, and Sony won't back down because of the video game implications,” he said.

Although a single high-definition format going to market would be preferable, he said, “It is what it is. Now we have to make the consumer feel as comfortable as possible that, hey, whatever player you get, you will be able to get content for it for a long time.”

Widescale adoption of a high-definition disc format will take 10 years, he predicted.

Improvements in home viewing technology plus long exclusive rights already granted for today's films will preserve the DVD industry for the foreseeable future, he said, quipping, “Laptops are getting better, but big screen TVs? They're getting better faster.”

But Netflix still plans to be there when first-run films become widely available for legal download, like music.

Downloading is “a very important area to us,” Hastings said. “We did name the company Netflix and not ‘DVD By Mail' consciously and for a reason.”

Meanwhile the company is testing subscriptions priced as low as $4.99 a month to determine what levels are profitable and still provide customer satisfaction.

For the present, the marketshare battle is a ground war.

“Our role is to get big enough that stores have to close en masse, and that will drive people online,” Hastings said.

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