TMO Interviews Netflix

On Thursday, TMO published story about the competitive posture of Netflix vis-à-vis the financial strength of Apple and a probable focus of the Apple tablet, namely HDTV and movies. Mr. Steve Swasey, Vice President, Corporate Communications for Netflix responded.

TMO: Mr. Swasey, Nick Wingfield of the Wall Street Journal and Daniel Sorid writing for Wired painted a rather austere picture of the resources and competitive posture of Netflix. What are your thoughts?

SS: Well, the Wall Street Journal article was posted about 7 months ago. Up until then, and since that time, we've been very bullish on Netflix growth. We now have 11.1 million subscribers, and we're continuing to see growth in that area. Next week, at our earnings report, you'll hear more about subscriber growth and the forecast for 2010.

Also, we're continuing to add devices on which Netflix members can watch instantly.

TMO: Has the rate at which you've added consumer devices paralleled the rate of subscriber growth?

SS: Netflix is growing in both dimensions. Members join Netflix because of the unparalleled convenience, selection and value. Consumer electronics companies embed Netflix because it’s becoming a ‘must-have’ service in consumer electronic devices.

TMO: I'm curious. Who foots the bill when a consumer electronics company, say, LG or Samsung, modifies their hardware to accomodate Netflix access?

SS: That's a private agreement between Netflix and our partners. We don't disclose the terms of those agreements.

What I will point out, however, is that we have had steady growth in the availability of titles. Our library has over 100,000 titles on DVDs and 17,000 of those titles can be watched instantly. Also, we've been very aggressive in bringing streaming to the PC and Mac, offering Mac access since the fall of 2008.

TMO: Isn't it true that you don't see any revenue from the Roku Box?

SS: That's right. Early in 2008, we spun that project out to Roku itself. At the time we decided that we are not a hardware company.

TMO: Do you feel that you have the financial strength to succeed, given what Warren Lieberfarb, former head of Time Warner's Home Video Division noted?

SS: I won’t comment specifically on that, but I want to point out that everything Netflix has done since our the subscription launch in 1999 has been 'up and to the right.' Our rise in subscribers has been meteoric, and we've survived Blockbuster and Wal-Mart.

TMO: What do you think your key strength is?

SS: Netflix offers unlimited subscriptions for US$9 per month. You can watch as many streaming titles as you want for that flat rate and get as many DVDs as you want for the same low subscription. When you watch instantly, you can jump around within the movie and even go to the end if you wish. In contrast, with some other offerings, you pay $4.99 to view one movie inside a 24 hour period. If you get interrupted and delayed, and that period expires, you'll have to pay the 4.99 again. Some don't mind doing that but it you do that twice in a month, you’re paying ten bucks for two movies when you could pay less for a month of unlimited movies at Netflix.

TMO: Just for clarification, is there a streaming option only for Netflix? Are you trying to convert people to it?"

SS: No. Every subscription from $9 up offers both DVD (and Blu-ray) mail rental and streaming. By the way, we ship two million DVDs on a typical day, and more than 40 percent of our subscribers are engaged in watching instantly.

TMO: Do you have anything else to add?

SS: Instant watching is popular and growing, but America still loves DVDs, and now Blu-ray. We expect to be shipping DVDs in the mail up to the year 2030 while at the same time continually increasing the platforms, titles and user interface for streaming.

TMO: Thank you Mr. Swasey for taking the time to fill our readers in on Netflix.