Netflix will boost third-quarter earnings and sales by at least 20% from a year earlier, marking at least the fourth consecutive quarter for such gains, as the largest U.S. movie-rental service via mail continues to improve its financial results by expanding its video-streaming service, the company’s financial chief said today.

The company is able to maintain its profit margins while boosting investment in its streaming service because Netflix’s widening customer base allows sales growth to keep pace with its increasing digital-content investment, Netflix chief financial officer Barry McCarthy said at the Citigroup Investment Research Global Technology conference in New York today. McCarthy added that many of Netflix’s new subscribers are previous customers lured back by the video-streaming option.

Netflix in July forecast third-quarter earnings of about $25 million on sales of about $419 million, both representing a 23% increase from year-earlier results. The company’s second-quarter earnings jumped 22% from a year earlier after Netflix boosted its sales and expanded its subscriber base by 21% and 26%, respectively.

“I don’t foresee in any of the scenarios we run related to the business that is going to disappoint investors,” McCarthy said today. “We’re pretty optimistic of the current trajectory of the business based on the success we’re having.”

Netflix, which is set to release third-quarter earnings next month, has been augmenting its DVD-by-mail service by expanding both the number of its digital titles and the number of electronics components that can play them on TVs. About a third of new subscribers to Netflix, which offers more than 12,000 of its approximately 100,000 titles in digital form, are previous customers who had canceled their subscriptions but were lured back largely by the expanded digital offering, according to McCarthy.

http://www.videobusiness.com/article/CA6695512.html

Thanks for bolding the interesting bits. Makes it easier to skim the article.

Another article with more info.

Netflix is targeting video game systems to help build its burgeoning movie streaming service, CFO Barry McCarthy Sept. 9 told an investor group.

Speaking at the 2009 Citi Technology confab in New York, McCarthy said the online DVD rental pioneer’s fundamentals have remained strong during the recession.

He said the growth of the Watch Instantly streaming service would continue to help boost the business for the foreseeable future.

The CFO said delivery of movies via Blu-ray players and Internet-connected HDTVs would take longer than video game systems as consumer adoption of the distribution channels slowly expands.

The executive said the majority of BD players and Web-enabled TVs are purchased during the winter holiday, which he said could involve as many as five winter holiday cycles to achieve a consumer installed base comparable to video game systems.

McCarthy said the primary deterrent to acquiring newer-release content for streaming is licensing costs, which he said would require upping spending by 15% to 20%.

“It’s just about money,” he said.

McCarthy said Netflix continued to see “traction” in streaming, which he said affected subscriber growth, the cost of sub growth, gross margin and profit growth (expected to exceed 30% this year, according to the CFO).

“Streaming has broader appeal because you don’t have to wait for DVD by mail,” McCarthy said.

He the company has been able to re-sign about 30% of former subscribers through streaming, which McCarthy said negated claims by some that Netflix would eventually run out of potential new subs.

http://www.homemediamagazine.com/netflix/netflix-cfo-game-platforms-key-streaming-growth-16985


I would gladly pay 20% more for my service if it meant getting new titles available via streaming.

I'm one of those who came back. Had a subscription since 2000 that I let idle after 2003, then got a Roku box for my frequent-of-late hotel stays and restarted that subscription.

I'm also a former subscriber that came back to Netflix for the digital content. (I have a Roku box.) I'm glad I did so, too.

I do wish there was a subscription option to have only the digital content, which would cost a bit less than the DVD rental/digital subscription I currently have. I'd be happy enough with just using the Roku and not having to rent DVDs...I often find I don't get a chance to watch them right away. Ah well!

DGK

"He said the company has been able to re-sign about 30% of former subscribers through streaming, which McCarthy said negated claims by some that Netflix would eventually run out of potential new subs".

I fall into this group as well. I had Netflix for about 6 months in 2008 but cancelled because I was always on the 'Long Wait' list for Blu-rays. I signed back up a couple of months ago and have enjoyed the streaming more than expected using a Roku box.

Oh yeah, although several of the Blu-rays in my queue have showed 'Long Wait' since rejoining, I haven't actually had to wait for any of them. I'm wondering if the additional charge for Blu-ray access has anything to do with this or if I've just been luckier so far...