Reed Hastings' Netflix plans to launch its video-on-demand service later this year with 800 to 1,000 titles available for download
NETFLIX ON DEMAND BY YEAR'S END
Will launch VOD service with 800-1,000 titles for download
By Jennifer Netherby 5/12/2005
MAY 12 | Netflix plans to launch its video-on-demand service later this year with 800 to 1,000 titles available for download and a minimal investment, company executives said during conference calls with shareholders and analysts this week.
Netflix chairman and CEO Reed Hastings told shareholders during the company's annual shareholder meeting Wednesday that Netflix would initially invest 1%-2% of revenue into its movie download service. The company is continuing to work with TiVo--with which it announced a strategic partnership for movie downloads last year--but at a "fairly slow intensity," Hastings said.
A day later, speaking at the Piper Jaffrey Seventh Annual Technology Conference, CFO Barry McCarthy said Netflix would deliver downloaded movies to TV sets through devices that connect to the TV and Internet and have Wi-Fi capability.
McCarthy said a number of manufacturers are considering making such devices, which are expected to reach market later this year. He didn't give any more specifics on which manufacturers would make the boxes but said Netflix wants to make its download service available on each manufacturer's device.
Both executives stressed that they believe DVD will be the dominant format for the next decade.
Meanwhile, McCarthy speculated that following changes on the board of directors at Blockbuster--which he referred to as The Nightmare on Elm Street--there would be a "more sensible approach" to subscription pricing, which could help Netflix return to profitability.
Blockbuster and Netflix both slashed prices late last year after Blockbuster launched its service and based on rumors that Amazon was planning to enter the market segment.
Netflix stock shot up 9% Wednesday after Blockbuster shareholders voted Carl Icahn onto the company's board, fueling speculation that Blockbuster might kill its online rental service as Icahn had promised to cut spending.
Since slashing its price to compete with Blockbuster, Netflix has foregone profits in favor of building its subscriber base.
Netflix, meanwhile, is considering selling advertising space on its DVD mailers, Web site and through targeted e-mails, which also could improve profitability, McCarthy said.
Netflix has in the past sold ad space for upcoming DVD releases on its mailers and has sent targeted e-mails advertising upcoming theatrical releases, which it most recently did for Kung Fu Hustle.
McCarthy said Netflix's knowledge of which movies customers are interested in based on its ratings system is an attractive selling point to studios targeting certain audiences, particularly as Netflix grows its customer base.
"At 1 million subscribers who cares, at 10 million subscribers everybody cares," he said.
Netflix will be testing different advertising options in the next few months and might announce more initiatives in the coming quarters, McCarthy said.
