Netflix Watch Now doubles streaming usage
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Arts Alliance America recently held a screening of Run Granny Run with film star Doris “Granny D” Haddock in Keen, N.H.
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Analyst ugrades stock based on Movie Gallery, Blockbuster difficulties
By Ned Randolph -- Video Business, 9/4/2007
SEPT. 4 | Netflix started the first week after Labor Day on a positive note. The online rentailer announced that usage of its Watch Now movie streaming service doubled in the six weeks that ended Aug. 22, and an analyst upgrade bolstered Netflix’s stock price, due to the faltering of bricks-and-mortar competitor Movie Gallery.
Netflix said its Watch Now service, which allows subscribers to watch streamed movies on their PCs, recorded 10 million viewings between July 7 and Aug. 22, more than doubling the viewings in the first half of the year when the company first rolled out the service.
Streaming is still a small portion of Netflix’s business, however.
"We ship 1.6 million DVDs a day, five days a week. [Streaming usage is] still a small percentage as most people want their content on DVD—not just from Netflix but across the board," said Steve Swasey, company spokesman.
Watch Now bills subscribers per minute, awarding one hour of viewing for every dollar a customer pays in monthly fees. A monthly subscriber who pays $16.99 a month for three DVDs out at a time can get 17 hours of free online content, he said.
Members can browse movies available to watch instantly by title, genre or star rating. Personalized recommendations, based on an individual's historical preferences, also appear at the top of the member's home page tabbed, "Watch Instantly."
The instant viewing service does not allow users to save the movie onto their computer.
Netflix has said it plans to introduce a set-top box to allow users to stream movies onto their TVs in 2008.
"The whole industry is moving online. Between us and our competitors, there are 10 million American homes renting online. We're taking business away from stores," Swasey said. "Most people go online so they don't have to drive to a video store."
Rival Blockbuster's online rental service, Blockbuster Total Access, which also allows customers to return their movies to any Blockbuster store, has made inroads into Netflix but at a significant cost.
In its last quarterly report, Blockbuster said its rental profits decreased by nearly 14% or $88.6 million in the second quarter of 2007 compared to the year before. The company spent money buying additional inventory to support in-store exchanges by Total Access customers.
Netflix shares rose today after Wedbush Morgan analyst Michael Pachter upgraded the stock to "hold" on thinking that Movie Gallery will soon declare bankruptcy and Blockbuster Inc. will cut marketing spending.
Netflix closed up 64¢ to $18.14 Tuesday. The shares have traded between $15.62 and $30 in the past year.
"Right now, we're kind of in the very early minutes in the second act of a three-act play," Swasey said. "It's the very early part of the hybrid act, which is DVD and watching online, whatever form that takes."
He added, "By the third act, it will be all online. DVDs will be obsolete, like VHS is today."
