Netflix may be getting out of the DVD business sooner that previously predicted, if Wednesday’s Q4 financial results are any indicator. The company now has close to twice as many streaming subscribers as DVD subscribers in the U.S., and it lost some 2.76 million DVD subscribers in the last quarter alone.

Netflix had 21.76 million subscribers at the end of Q4, which is 220,000 more than in the previous quarter. Internationally, it now has 1.86 million subscribers. The number of DVD subscribers shrunk to 11.17 million, down from 13.93 million in Q3. That means that for the first time ever, streaming plans outperform DVD rentals by a ratio of close to 2:1.

The good news for Netflix is that even with its steep decline in DVD rentals, the overall number of customers is growing again. Netflix lost 810,000 U.S. subscribers in Q3 as a result of its unsuccessful attempts to spin off the DVD business into a separate company, as well as a price hike earlier in 2011. In Q4, that combined  subscriber number once again grew by 610,000.

Netflix executives have long said that they see the company primarily as a streaming video provider, with DVDs being part of a legacy business that will decline over time. However, the accelerated rate of decline could spell trouble for Netflix’s bottom line: The company has been using the shrinking but very profitable DVD rentals to finance its international expansion, which it put on hold until international profitability returns after launching in the U.K. and Ireland in January. With DVD customers canceling by the millions, that could now be further away than previously estimated.

Netflix CEO Reed Hastings wrote in a letter to shareholders (PDF) that he expects DVD subscription cancelations to level off this year, with an expected 1.5 million customers saying good-bye to the iconic red envelopes in Q1 of 2012. From the letter:

“While contribution profit from domestic streaming will grow sequentially, it will not be sufficient to offset the sequential decline in DVD profits (~ million), and the sequential increase in our international losses (~ million), as well as cover our global G&A and Technology & Development costs. As a result, we expect modest quarterly losses, as well as losses for the calendar year.”

In other words: Netflix won’t enter any other territories in 2012, and might have to work on making more money with streaming if it wants to keep expanding in the future. Because DVDs may not be around for much longer.

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While US viewers continue to wait for the expat-edition Global BBC iPlayer app, BBC Worldwide has announced a new version launching December 8th specifically for iPhones and iPod Touches. Like its big brother app for the iPad, this free download lets subscribers stream or download shows for offline viewing, as well as stream video to the Apple TV via AirPlay. Whole new categories of programming are coming online soon including music, arts and culture, and radio, and now it can all fit in one’s pocket. Check the gallery for a couple more screenshots, or after the break for a press release with all the applicable pricing and regional information that’s available.

Continue reading Global BBC iPlayer app gets squeezed down to iPhone / iPod Touch size

Global BBC iPlayer app gets squeezed down to iPhone / iPod Touch size originally appeared on Engadget on Tue, 06 Dec 2011 13:53:00 EDT. Please see our terms for use of feeds.

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Continue reading Nook Newsstand getting Condé Nast publications (except Vogue)

Nook Newsstand getting Condé Nast publications (except Vogue) originally appeared on Engadget on Tue, 15 Nov 2011 21:46:00 EDT. Please see our terms for use of feeds.

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Poor Netflix has had a rocky six months.  It’s like having a friend go into complete, total meltdown and trying to decide when you should start planning the intervention.

After Netflix announced it was splitting its streaming and DVD delivery services into two separate companies, they made a complete 180-degree turn and combined the services again.

Just this week, Netflix announced their Q3 earnings, and while they met expectations, they lost 800,000 subscribers. Now the market is punishing them. In after-hours trading just after the announcement, they lost nearly 30 percent of their stock value. In opening trading the next morning, they were down another 10 percent. While all that loss may not have been avoidable, the industry is wondering why Netflix decided to make this move so quickly.

Colin Dixon of The Diffusion Group (TDG) succinctly referred to this whole event as “premature bifurcation.” And he’s right – many of us within the industry may have seen this split as inevitable, but the timing and the way Netflix has handled this announcement hints at a larger, more complex situation.

Why break up with yourself?

Why would Netflix choose to split itself apart?  And why completely change the name and make two different services to interact with their company?

It all started with the Starz negotiations: Netflix landed a great deal with Starz in 2008. For only million, Starz gave Netflix access to some pretty good movies to stream because the perceived value of streaming was very low at the time.

Fast-forward to 2011. Netflix is now available on so many devices and touting the largest subscriber numbers for a MSO, so the perceived value of that license goes up quite a bit. This makes it a lot harder for Netflix to negotiate cheap prices; hence the very public break up this summer.

So, how does Netflix improve its bargaining position? Oddly enough, by weakening themselves (or at least appearing to be weaker), they position themselves to negotiate for a better price. Let me explain: by splitting the two entities apart, they show much lower subscriber numbers to potential licensees as reasoning for lower pricing. By still having the two companies under one roof, Netflix gets to play the beggar during negotiations for streaming in regards to subscriber numbers, while still offering combined DVD & streaming licenses as an incentive. Therefore, a “weaker” Netflix might have been stronger from a negotiation standpoint.

The problem is, they couldn’t come out and just say that, so instead we get the standard Netflix hubris, disingenuous apologies, and some new branding.  And ironically, now Netflix is much weaker than it planned.

Experience teaches at the cost of mistakes

Despite all the missteps, I still would like to see them succeed. Netflix may be down, but they definitely aren’t out of the game.  Let’s face it, they still have the largest online subscriber base for video content, they have announced rollout plans in new markets, and have recently announced some great new content deals.

Unfortunately, the industry is still learning what customers do and don’t want. Netflix is our canary in the coal mine as they find new and exciting ways to create a burgeoning business model while pissing off content makers and alienating their own customers in the process.

If Netflix doesn’t rebuild itself soon, then maybe it is time for that intervention. And if this WSJ article is correct, that intervention could come in the form of takeover interest. Either way, to regain subscribers and prove the streaming business case, Netflix needs to get back to signing content deals.

Andy Beach is Vice President of Marketing and Product Development at SeaWell Networks, a Canada-based company that specializes in online streaming video delivery. 

Image courtesy of Flickr user jcoterhals.

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Of Verizon customers planning to buy an iPhone in the future, many will skip the iPhone 4 and go straight for the yet-to-be-released iPhone 5.

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A couple of interesting messages just appeared from the Hulu Support Twitter account. In several recent responses to subscribers complaining about ads that Hulu plays as part of its premium subscription service, the account tweeted:

“We’re currently an ad-supported service but looking into the option of a higher price ad-free version.”

Hulu has never entirely ruled out an ad-free model, but the tweets come as a bit of a surprise, since Hulu has long maintained its reliance on ads, even for its Hulu Plus service. Rather than going ad-free, like Netflix has done, Hulu Plus has a slightly lighter ad load but also gives subscribers access to a wider library of content.

In an February blog post, Hulu CEO Jason Kilar talked up the value that Hulu provides to content owners in terms of ad revenues, comparing Hulu’s effective ad rates versus those from broadcast DVR and cable DVR. In a more recent blog post, however, Kilar was more bullish on the company’s Hulu Plus subscription service, saying that the company would soon have a million paying subscribers.

The consideration of an ad-free service comes as Hulu has been put up for sale by its owners, which include Fox, Disney and NBC Universal. The message was also tweeted after Fox announced plans to put up a pay wall which would restrict access to shows for eight days unless a viewer has proven he or she is a cable subscriber.

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