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Netflix Attributes Subscriber Growth To Game Platforms

Netflix Attributes Subscriber Growth To Game Platforms

January 28, 2010 | By Kris Graft

January 28, 2010 | By Kris Graft
More: Console/PC

Netflix's expansion into streaming content on video game consoles is continuing to pay off, the company said this week.

"Two years ago, our year-over-year subscriber growth was 18 percent. A year ago our year-over-year subscriber growth was 26 percent. Now it is 31 percent," CEO Reed Hastings said in a TechRepublic report following the company's fiscal year results.

"There are two possible interpretations: the more conservative is that we are experiencing bumps due to the expansion of Netflix streaming to video game platforms, each with large installed bases. The more generous interpretation is that we are on the front half of a big S-curve of streaming adoption."

Netflix first offered its "Watch Instantly" streaming video service on Xbox 360 in 2008. Users who pay for an Xbox Live Gold subscription and who are also Netflix customers can watch Netflix's wide array of TV shows, movies, and other videos through their television sets.

Sony introduced the service to PlayStation 3 last year, and Nintendo will add it to the market-leading Wii this spring.

The introduction of the service on Wii could be a significant factor in capturing more subscribers, according to Wedbush Morgan's Michael Pachter. "Tapping the Wii’s installed base is expected to be more difficult as Netflix will not have an on-screen dashboard presence on the platform, but the Wii’s installed base of 26 million in the U.S. is almost as large as the Xbox 360 and PS3 combined," he said.

In Netflix's fiscal Q4 ended in December, the company gained over 1.5 million more subscribers to its service, which now boasts 12.27 million subscribers, a 31 percent year-on-year increase. In order to use "Watch Instantly" on any compatible device, users must have at least Netflix's basic $8.99 per month membership.

Netflix expects to have 15.5 million to 16.3 million subscribers by the end of 2010. "The robust subscriber guidance for Q1 suggests to us that the recent PS3 partnership is driving significant subscriber growth, and it is likely that the Xbox 360 deal continues to contribute a large number of new subscribers as well," Pachter said.

"Based upon comments in the earnings call yesterday, it appears that Netflix’s exclusive relationship with Microsoft on the Xbox 360 will end in November (after two years), allowing the service to be accessed via the PS3 dashboard later this year," he added. Some time this spring, Netflix will be available (in standard definition) on the Wii platform, and even at a lower adoption rate, it is likely that there is significant room for subscriber additions from both the PS3 and the Wii during 2010."

Netflix reported revenues for the fourth quarter of $444.5 million, up 24 percent year on year; net income was $30.9 million, up 36 percent year on year.

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