Netflix will expand its horizons next year, leaving US borders behind.
This revelation means two very important things: 1) Netflix has gained some international distribution rights and a success in its first new market will make the next new market come that much quicker; and 2) the streaming-only option has arrived.
During the company’s Q3 conference call, CEO Reed Hastings said, “With global studios and with global CE companies, we are planning our first international effort in the second half of 2010.”
Netflix finally gave out some hard numbers during the conference call, and Hastings promised they would come with every earnings report to follow. The company now says 42% of its 11.1 million subscribers streamed at least 15 minutes of content this quarter, up from 22% this time last year. The 15-minute benchmark was used because it is around the length of a typical TV show episode without commercials, though Hastings said that “most” subscribers watched for more than 15 minutes.
The total of 11.1 million subscribers is a 43% increase in users from last year.
Hastings didn’t give much detail about which country Netflix was considering, but the UK seems a likely target. It has a decent installed-base of Xbox 360 users who are already streaming content and PlayStation 3 users, not to mention existing consumer deals where ISPs serve as content delivery providers. (It also has a Netflix copycat in LoveFilm that might be right for acquisition).
Hastings said the company is looking for future deals with ISPs and movie studios, which could mean integration into set-top boxes and perhaps a combination with all the TV Everywhere type deals.
While there are many big fans of the service, there may be none bigger than the postal carrier. Netflix expects its postage costs to reach $600 million in 2010, followed by $700 million in 2011. The cost was something that Hastings said would drive the company to license its streaming service to more devices and reach more homes. This is also a reason the company is pushing to get more streaming licenses. Perhaps this means a streaming-only option is likely for the US as well.
Studios have seen an unsettling drop in DVD sales, and Hastings said they were considering a sales-only window for DVDs. Netflix would wait to rent out movies for a certain time period after the discs go on sale – purchasing them later would no doubt give Netflix a cheaper buying price.
Hastings also fielded the concerns of ISPs over bandwidth used by services like Netflix and suggested that the company and ISPs could work together for some promotional pricings or offerings that would make more expensive higher-end broadband plans more attractive.