Capitalizing on stay-at-homers, Netflix posts a 45% profit jump
"It's very clear that streaming is energizing our growth," said Netflix Chief Executive Reed Hastings, in announcing a 45% leap in quarterly profits for the online video rental service despite a declining overall economy.
With consumers relying more on home entertainment during the financial crunch, Netflix is taking obvious advantage of the trend, closing the fourth quarter with 9.39 million subscribers, up 26 percent from the same quarter the year before.
Netflix first began cashing in on video streaming in January of 2007, with the introduction of live streaming as an alternative to its DVD-by-mail rental service. Meanwhile, it has boosted demand for its streaming service by entering into pacts for devices from Samsung, LG, and Microsoft that let consumers "Watch Instantly" on TV, as opposed to the PC screen.
Strong sales of flat panel TVs, even in the recession, haven't exactly hurt the Netflix cause. Neither has the availability of high-definition content.
Only some of the titles in the Netflix video library are streaming-enabled. But during yesterday's conference call with financial analysts, Hastings said the company will "substantially" raise its investment in video streaming over the year ahead.
"We plan to spend as much money as we can with the studios, licensing as much content as we can. And we are already one of the studios' largest Internet revenue services," according to Hastings.
Also over the fourth quarter, the company's revenues stepped to $359.6 million from the previous level of $302.4 million. Meanwhile, the cost of acquiring new subscribers dropped to $26.67 per subscriber from $34.58.
In other customer garnering efforts, Netflix engages in promotions such as a deal with movie Web site Fandango offering consumers one free movie theater ticket in exchange for signing on for a one-month Netflix free trial.
Revenues shot to $359.6 million from $302.4 million. At the same time, the cost of acquiring new subscribers fell to $26.67 per subscriber from a previous level of $34.58.