Netflix Predicts DVD Rental Peak Still 5-10 Years Away
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[May 29, 2008]

Netflix Predicts DVD Rental Peak Still 5-10 Years Away

Contributing Editor
 
Up to this point, Netflix CEO Reed Hastings has managed to grow his DVD rental business even as he has gotten Netflix ready for the coming on-demand content delivery revolution. And he thinks Netflix still has five, perhaps 10 years, before DVD rentals hit their peak, according to a Reuters (News - Alert) report.


 
"We think the by-mail business is very strong but will probably peak in the next five years," Hastings said in the report. "Our key challenge is growing earnings per share and subscribers while funding streaming.”


 
Hastings told investors that the company's online investment in 2008 and 2009 is expected to be "fairly inefficient," but noted the reason for higher spending was to cultivate better partnerships and content.
 
He cited as risks the growing popularity of stand-alone DVD rental kiosks, improving video-on-demand services from cable and satellite companies and more competition in streaming from Web giants like Amazon.com (News - Alert) Inc. as well as potential promotional spending by Blockbuster as competitive issues.
 
"Once we're in streaming, we can attract well beyond 20 million subscribers worldwide," Hastings said.
 
It used to be more common to hear observers questioning how long Netflix could stay in business, given the transition from DVD rentals to on-demand viewing. One doesn’t hear that much, anymore. Instead, people want to know how the transition is shaping up.
 
Blockbuster, on the other hand, still hears concerns about the transition from retail to on-demand, in a way that Netflix does not. Most observers seem to believe the transition from retail locations to online is tougher than DVD-by-mail to online. Not an unreasonable observation, to be sure.
 
Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.
 
Don’t forget to check out TMCnet’s White Paper Library, which provides a selection of in-depth information on relevant topics affecting the IP Communications industry. The library offers white papers, case studies and other documents which are free to registered users. Today’s featured white paper is  Fixed Service Strategies for Mobile Network Operators, brought to you by Comverse (News - Alert).
 

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