Netflix announced its quarterly earnings yesterday, but it wasn’t the massive 31% growth in revenue to $553 million or the astounding 52% uptick in subscribers to 16.9 million that will turn heads. Rather, the truly shocking figures show just how much the company has transitioned away from its by-mail platform: 66% of subscribers have streamed content online, and next quarter the majority of members will watch more content streamed than delivered on DVD.
Netflix CEO Reed Hastings made this point the centerpiece of the earnings report--the fact that the number of subscribers streaming shot up from just 41% year-over-year.
“This growth is clearly driven by the strength of our streaming offering,” said Hastings in a company statement. “By every measure, we are now primarily a streaming company that also offers DVD-by-mail.”
The company has long planned this transition from DVDs to streaming. In July, Netflix announced a streaming-only service would be launching in Canada, possibly a testing ground before launching stateside. Last month, Hastings bolstered this suspicion when he hinted that a less expensive streaming-only option was coming to Netflix “in the coming months.” That’s not to mention the many deals the company has been finagling for expanding its online library, from deals with Epix to Relativity Media.
And a streaming-only service could not come soon enough for Netflix. The company is dropping more than $600 million annually in postage fees--more than the revenue reported this quarter—and had spent millions more mailing discs out to subscribers.
The U.S. Postal Service probably isn't happy about the increasing migration to the web. Neither, suggests a new report, are cable providers. According to Morgan Stanley analyst Ben Swinburne, should Internet viewing options lead to widespread "cord-cutting," or deactivation of cable service, smarting cable companies may decide to raise the price on broadband service. But Netflix's CEO has claimed that Netflix subscribers don't tend to cut the cord.
[Image: Flickr user Ben Lucier]