Home Media Magazine - April 27 - May 3, 2008 - (Page 26) NEWS Netflix Guidance Disappoints Home Entertainment Summit Continued from page 1 Continued from page 1 www.homemediamagazine.com Group. Advance registration fees are $545 for DEG members and $595 for all others. Advance registration ends June 9. After this date, registration fees are $595 for DEG members and $645 for nonmembers. Cost to attend only the dinner and cocktail party is $200 if registered before June 9, $250 after. Special press registration is available to credentialed media. For information, visit HomeMediaConferences.com or contact Kristina Kronenberg at kkronenberg@questex. com or 714/338-6743. Doug Anmuth, analyst with Lehman Brothers, said he supported Netflix’s investment in digital distribution in the long run despite its current fiscal impact. “Digital spending has potential to curb the near-term profitability upside of what is still primarily a DVDby-mail business,” Anmuth wrote in a research note. Rick Munarriz with online analyst The Motley Fool said margins would be tested as Netflix continues to formulate its digital channel — a strategy the analyst contended might be for naught. “In five years, is there any reason to believe that the movie studios themselves won’t be the ones dealing directly with the end users?” Munarriz asked. Indeed, Hastings said Netflix will begin charging subscribers a monthly premium (believed to be $1 to $2) for Blu-ray movies, which currently represent a single digit percentage of all rentals. He cited higher acquisition costs for Blu-ray titles, compared to standard DVD, for the increase. “Consumers are used to paying [a premium] for HD content in every other distribution channel, including video rental stores, VOD and cable,” Hastings said. With Blu-ray rentals representing a tiny percentage of Netflix’s revenue, analysts said when Blockbuster Online raised prices last year it lost 500,000 subscribers — many to Netflix. Daniel Ernst with Soleil-Hudson Square Research in New York said that until Netflix begins charging for content streams, there would be questions. “If they can raise the rates on Bluray and start charging for digital content without losing subscribers I might be more optimistic,” Ernst said in a note. “Until they can show that, [the stock] is going to be under pressure.” Record new subscribers coupled with a six-year low on costs related to acquiring those subs resulted in Netflix posting positive first-quarter (ended March 31) results. The service reported net income of $13.4 million on revenue of $326 million, compared to income of $9.8 million and revenue of $305 million during the same period the previous year. Household penetration reached 7%, up from 6.3% the year prior. Netflix reported net subscriber additions of 764,000, with subscriber acquisition costs (SAC) at $29.50 and churn at 3.9%. Churn is described as the number of subscriber cancellations divided by the number of subs at the beginning of the quarter plus gross additions, then divided by 90 days. Netflix ended the quarter with 8.2 million subscribers. Hastings said he doesn’t expect second-quarter sub additions (about 160,000) to surpass the first quarter. He expects about 1.9 million new subs by the end of the year. The company projects 9.4 million subscribers by the end of 2008, an increase of 27% from 2007. “All three [metrics] were record performances in six years as a public company,” Hastings said. Marketing spending increased $3 million in the quarter to $55 million, which was $17 million less compared to the same period in the previous year. He said the company had teamed with three additional consumer electronics partners since the January announcement of a co-branded set-top box with LG Electronics. The co-branded devices are expected by the fourth quarter. A separate partnership with an unnamed smaller CE player is expected to produce a consumer product earlier. Hastings said successful implementation of movies to the TV from the Internet will require a multitude of partners beyond the companies already involved. “These partnerships have some implementation and execution risks as with all new technologies,” Hastings said. “We’ll take it year by year and model by model.” In response to a question regarding Blockbuster’s acquisition bid of Circuit City, Hastings said it was too early to comment. He said if Blockbuster abandoned DVDby-mail to focus on Circuit City, Netflix would be willing to absorb Blockbuster’s subscribers as it did when several years ago when WalMart.com shuttered its rental service. “If Blockbuster made such a decision we could probably work something out,” Hastings said. “[But] they’ve been in the business for a couple of years, and they’ve got a big investment in their online model. I anticipate them to stay in the business for the foreseeable future.” the presidents’ panel and “It’s Blu” cocktail party celebrating the end of the format war. The dinner will be themed as “A Tribute to New Line.” This year’s summit will examine several key issues facing the future of home entertainment. Is Blu-ray Disc ready to take the mantle of packaged media from DVD? Will electronic sellthrough be a factor in home viewing habits? Consumers, bloggers, industry experts and studio representatives will be on hand to weigh in on these issues. The two-day event will feature two market research super sessions, including a report from Screen Digest’s Helen Davis Jayalath. And for the seventh consecutive year, studio presidents will gather to discuss trends and developments in the industry. Also on tap are the fourth annual DVD Critics Awards, honoring the best DVDs and high-def discs of 2007, as chosen by a panel of DVD experts and entertainment journalists. I Panels examining the challenges in transitioning from DVD to Bluray Disc. I A look at electronic sellthrough, and why it hasn’t caught on with movies as it did with music. I A focus group that looks at home entertainment habits from consumers representing all walks of life. The summit is produced by Home Media Magazine in cooperation with DEG: The Digital Entertainment Blockbuster Tests New Stores Continued from page 1 Other highlights: I A state of the industry presentation. Blockbuster’s locations from a pure rental play to entertainment convenience retailer — a strategy that underscores the company’s acquisition attempt of Circuit City Stores. “I’m a big believer of the physical relevance of a store,” Keyes told The Dallas Morning News. “We need to change our stores to become a destination for entertainment.” The paper reported that a prototype Blockbuster location touting tech- nology and DVDs recently sold its first HDTV, a 40-inch Sony Bravia. Spokesperson Karen Raskopf said it was too early to determine what the long-term plans with the prototype stores were. “Our goal is to enable customers to tell us what they like through their purchases and rentals, so that as we transform Blockbuster we’re doing it with the changing needs of entertainment customers in mind,” she said. JUST ANNOUNCED A Weekly Product Update* Welcome Home Roscoe Jenkins STREET DATE Definitely, Maybe BOX OFFICE (MILLIONS) The Other Boleyn Girl TITLE PREBOOK GENRE PRICE Welcome Home Roscoe Jenkins 6/17 5/13 $42.2 Comedy DVD $29.98 Universal. 2008. Martin Lawrence, James Earl Jones, Cedric the Entertainer, Mike Epps, Mo’Nique. A successful Los Angeles talk show host is reunited with his hillbilly family in the Deep South. Definitely, Maybe 6/24 5/20 $32 Romance DVD $29.98 Universal. 2008. Ryan Reynolds, Isla Fisher, Abigail Breslin, Elizabeth Banks, Rachel Weisz. A father tries to explain his upcoming divorce and previous relationships to his 11-year-old daughter. Includes deleted scenes, commentary and featurettes. The Other Boleyn Girl 6/10 5/8 $26.8 Drama DVD $28.96, BD $38.96 Sony Pictures. 2008. Natalie Portman, Scarlett Johansson, Eric Bana. Based on the best-selling novel of the same name, two sisters are driven by their ambitious family to seduce England’s King Henry VIII. Includes deleted and extended scenes, featurettes and more. Witless Protection 6/10 5/14 $4.2 Comedy DVD $29.95, BD $39.99 Lionsgate. 2008. Larry the Cable Guy, Ivana Milicevic. A small-town sheriff unknowingly becomes involved in a high-profile FBI case when he rescues a beautiful female witness from the FBI agents assigned to protect her. Funny Games 6/10 5/6 $1.3 Horror DVD $27.95 Warner. 2008. Naomi Watts, Tim Roth, Michael Pitt, Brady Corbet, Devon Gearhart. In this English-language remake of Michael Haneke’s German film, a family is held hostage and tortured in a vacation home by two young serial killers. Dexter: The Complete Second Season 8/19 7/8 Cable Drama DVD $42.99 Paramount. Michael C. Hall, Julie Benz, Jennifer Carpenter, Erik King, Lauren Vélez, David Zayas. Dexter is a Miami police forensic blood splatter expert, who lives a secret life as a serial killer stalking criminals who have escaped the justice system. Four-disc set includes 12 episodes. * In order of box office, then prebook date Home Media Magazine April 27–May 3, 2008 http://www.homemediamagazine.com http://www.homemediaconferences.com http://www.homemediaconferences.com http://walMart.com http://walMart.com
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