Experiencing significant subscriber loss in 2011 after announcing a price increase and the splitting of the service into DVD and streaming plans, Netflix bounced back as it reported its Q4 2011 financials. In addition to beating the expected financial results, Netflix reported in its letter to invenstors that it had positive subscriber growth for its streaming business (PDF). In the United States, Netflix added 220,000 streaming video subscribers and 380,000 in international markets such as Canada and Latin America, bringing the total number of streaming subscribers to 23.5 million. As expected, there was a loss of DVD subscribers (1.86 million loss for a new total of 11.17 million).
One of the other hiccups in 2011 was that Netflix and Starz failed to renew their licensing agreement. It turns out that Netflix has replaced a a number of the popular Starz supplied movies by going directly to the studios for streaming rights. Disney movies and Starz originals are the key exceptions to this with titles including Toy Story 3 and Tangled due to come off the service at the end of February (hint: watch them now!). Netflix is promising a “steady flow of new titles to the service” in 2012.
Netflix expects to lose money for the most of 2012. While Netflix recently expanded into the United Kingdom and Ireland, they are holding off on any additional international expansion until they return to profitability. So, my cousins in Italy, you’ll have to wait till 2013.
For competition, Netflix anticipates that Amazon will offer a stand-alone version of their Amazon Prime streaming service this year. Interestingly enough, the New York Post published an exclusive today speculating the same thing. According to the Post, Hollywood doesn’t like that Amazon bundles their content as part of their free shipping service and its become a stumbling block for Amazon to obtain content. However, Netflix still sees TV Everywhere services such as HBO GO as the most significant threat to the business long-term.
In the product and technology area, the one thing that caught my eye was that Netflix “made several personalization algorithm breakthroughs for how we sort titles in each category, making it easier for our members to find movies and TV shows they’ll love”. Netflix sees its recommendation engine as one of its key differentiators in the streaming video space.
I’ll update the story later if anything interesting comes up on the conference call.
Some highlights from the call:
- Netflix expects to have some multi-account options in place for 2012. In another words, it will recognize some form of profiles that will only show selected content to a particular person. The example given was that a child would not see some adult content and vice-versa. So, we could be seeing some overhauled Netflix parental controls in 2012.
- Netflix is comfortable with its level of content in 2012. Spending 100% more than this time last year and most of it is focused on new content.
- While not on the initial list of supported devices, Netflix will be available on Apple TV in the UK.
- Netflix has no plans for bidding on current seasons of TV shows
- Will be looking at 3D content for streaming this year
- Episodes of original series such as Lillyhammer will be released all at once since Netflix is all about “binge viewing”.
- No plan for marketing the DVD service in 2012
- No interest in providing a la carte or pay-per-view. Focus is unlimited viewing for a low price, $7.99.
- Growth areas for devices include tablets and Smart TVs
- Netflix typically bids against cable networks for content. Amazon and Hulu are not who Netflix is typically bidding against.
- The only cost incurred from customers watching more content is the cost for Content Delivery Networks
- There are different levels of exclusivity in the content deals that Netflix negotiates. It can range to total exclusivity (exception being physical media) to only exclusive among video streaming services.
- Excited about the prospects of social TV. Currently live in every country except the U.S.
- There are no longer plans for video game rentals