If DVD sales are on rewind, Netflix is on fast-forward
The bottom may be falling out of the DVD market for Hollywood, but not at Netflix Inc.
The DVD rental company set a record for subscriber growth -- blowing past the 10-million-customer mark -- and reported that first-quarter profit skyrocketed almost 70% from the same period a year earlier.
Reed Hastings, chief executive of Netflix, attributed the growth to the online video service’s “unlimited rental” deal, which allows movie junkies all-you-can-watch plans for the month. A weak economy with more families looking for low-budget entertainment probably didn’t hurt either.
But the performance didn’t have much staying power with investors. Netflix’s stock dropped more than 6% to $42.25 a share in after-hours trading as analysts were expecting even stronger results.
Netflix ended the first quarter with 10.3 million subscribers, a 25% gain from the first quarter of 2008, and posted net income of $22.4 million on revenue of $394.1 million. It predicted that its second-quarter profit should be between $27 million and $32 million and that its subscriber count could hit 10.6 million.
While Netflix is raking it in, Hollywood is struggling with its DVD business. Adams Media Research, which tracks DVD sales, estimated a 11.4% drop in consumer spending on DVDs in 2008, a trend expected to continue this year.
Netflix isn’t the only beneficiary of that trend. Redbox, the movie kiosk operator, has also enjoyed a surge in business so strong that it is planning to expand from 12,900 kiosks to 20,000 by the end of the year.
--
The biggest entertainment stories
Get our big stories about Hollywood, film, television, music, arts, culture and more right in your inbox as soon as they publish.
You may occasionally receive promotional content from the Los Angeles Times.
