Netflix stock leaped 20 percent this morning in response to its fourth quarter ‘09 financial report released Wednesday.
According to the report, the number of online movies viewers is up, last year’s goals were surpassed, and the outlook is good for the Los Gatos based online movie rental service.
Barry McCarthy, Netflix Chief Financial Officer, said profits were higher in 2009 due to a conservative financial forecast report in 2008—which resulted in the company spending less on content going into 2009.
“The business outperformed and we weren’t able to forecast that accurately,” McCarthy said. In this case, that was a good thing.
Three million new Netflix subscribers helped increase revenue by 24 percent from 2008 to 2009. Subscriber cancellations, known in the biz as «churn,» decreased from 4.2 percent to 3.9 percent.
Netflix predicts that good times will continue. The company is forecasting revenue growth from $490 million to $496 million in the first quarter of 2010.
Reed Hastings, Netflix Founder and CEO, says one reason for these numbers is Netflix online streaming movie service launched in June 2007.
“Service is better than it was two to three years ago because of the streaming,” said Hastings, who added that it made the service more attractive and easier to sell.
Fourty-eight percent of Netflix subscribers used the “Watch Instantly” service in 2009, which is now the member home page on the Netflix.com website. In 2008 that number was just 28 percent.
While streaming movies are becoming more popular, Netflix does not anticipate eliminating the DVD-through-the-mail service which is still its primary business.
Hastings says new releases will continue to be provided to Netflix customers through the mail. “The strategy’s not particularly focused on how do we break through to get the newest new releases on streaming,” he said. Hastings equates Netflix with premium cable channels like Starz and HBO—neither of which show just-released films.
Streaming will be more focused on TV episodes and getting “every movie ever made,” than having new releases available online. Hastings says an agreement with Starz for content is going well.
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