Netflix moving online only, net up 26%
October 21, 2010
After building a successful business by shipping millions of DVDs every month in the mail, Netflix expects by the end of this year to start letting subscribers give up discs.
Chief Executive Reed Hastings has said Netflix is looking to offer a new lower-cost plan through which subscribers could access movies and TV shows solely online. The company last month started offering a streaming-only service in Canada for $7.99 a month. Hastings said success there has led Netflix to test an identical offering in the US If the test fares well, all consumers will be able to sign up for streaming-only service.
Netflix will still offer users its current subscription plans, all of which include Internet streaming and DVDs through the mail. The move comes as Netflix for the first time will deliver more hours of content via the Internet than on DVDs. In addition, Netflix is now spending more on content for its streaming service than for discs. That’s largely because of a new five-year deal worth $1 billion with pay cable channel Epix, which is providing movies from Paramount Pictures, Lionsgate and Metro-Goldwyn-Mayer.
“By every measure we are now primarily a streaming company that also offers DVD-by-mail,” Hastings said. “DVD-by-mail shipments are still growing, but streaming for us is much larger and growing much faster.”
The company said 66 per cent of subscribers watched at least 15 minutes of content from Netflix online in the quarter ended September 30th, up from 61 per cent in the second quarter. Most are doing so with a growing number of digital devices that have Netflix built in, including Apple TV, video game consoles and Internet-connected televisions.
The company added 1.93 million subscribers in the third quarter, bringing its total as of Sept. 30 to 16.9 million. It said 6 per cent of those were in a free trial period. Netflix’s subscriber growth has been accelerating recently as more consumers cut back on DVD purchases and turn to lower-priced rentals. The number of new subscribers grew 279 per cent in the third quarter from a year earlier.