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The Honolulu Advertiser
Posted on: Sunday, February 1, 2009

Video streaming attracting more subscribers to Netflix

By Dawn C. Chmielewski
Los Angeles Times

Netflix, the movies-by-mail service, has shown little sign of the economic slowdown that's nailed other companies this earnings season. But it attributed its fourth-quarter jump in revenue, profit and subscribers to a surprising factor: the surging popularity of its online video-streaming service.

Last week, Netflix said it added 718,000 subscribers in the fourth quarter, far more than analysts had expected, bringing its subscriber base to nearly 9.4 million. Netflix expects the number to reach 10.6 million within the next three months, even as other parts of the entertainment business contract because of the recession.

"It's very clear that streaming is energizing our growth," said Netflix Chief Executive Reed Hastings during a call with analysts.

Hastings said the company's streaming business was propelled by connection with devices from LG Electronics, Samsung and Microsoft that offer Netflix's "Watch Instantly" service. Subscribers can use the service to stream any of about 12,000 television shows and movies without waiting for the DVD to arrive. The company "substantially" increased its investment in streaming video and plans to do the same in 2009, he said.

"Our spending is limited only by what content is available at reasonable costs," Hastings said.

DVDs remain the core of the company's business, and Netflix doesn't expect that market to peak until at least 2013.

But Netflix is betting that its future relies on delivering its streaming service to television and it's paying device makers marketing money to promote Netflix.

Netflix reported revenue of $359.6 million, up 19 percent from a year ago. Net income rose 45 percent to $22.7 million, or 38 cents a share, compared with net income of $15.7 million, or 23 cents a share, a year ago.