How does a leisure company grow during a cash-strapped recession? Give customers what they want. Look no further than Netflix
Revenue climbed 24% to $423.1 million. Earnings grew even faster, with Netflix's third-quarter profit clocking in at $0.52 a share, well ahead of last year's $0.33-a-share showing. Wall Street was only banking on net income of $0.45 a share. There were 11.1 million subscribers at the end of last month, 28% more than the audience Netflix commanded a year ago.
The secret to Netflix's success lies in making its service too addictive to quit. That's a tall order, and the company's churn seems to belie its success there. Its monthly churn rate of 4.4% remains within its historical range, but it's two to three times higher the churn of other monthly entertainment services, including Sirius XM Radio
The distinction here is that those services often require either a three-figure investment in hardware, or a long-term commitment in order to receive subsidized hardware. Cancellations aren't an easy click away. Thankfully, reactivations and new member acquisitions are just as easy -- and cheap -- for Netflix.
With plans including unlimited DVD rentals and online streams for as little as $8.99 a month, Netflix offers customers dynamite value. Heck, $8.99 is often less than a single movie ticket costs these days.
The unlimited streaming also helps Netflix compete against Apple
The improving margins prove that Netflix's model math works. They're also leading this friend to couch potatoes everywhere to raise its guidance yet again.
|
2009 Guidance |
Now |
Three Months Ago |
|---|---|---|
|
Subscribers |
12 million - 12.3 million |
11.6 million - 12 million |
|
Revenue |
$1.666 billion - $1.672 billion |
$1.65 billion - $1.67 billion |
|
EPS |
$1.82 - $1.90 |
$1.65 - $1.82 |
Let's have some fun. How many subscribers do you think Netflix will have by the end of the year? Take a shot in the comment box below, and I'll come back in late January and crown the victor.
