Netflix expects to add 1.7M streaming video subs in Q1; CEO not interested in 'cord cutting battle'

While Netflix (Nasdaq: NFLX) CEO Reed Hastings said he expects to sign 1.7 million new streaming video subscribers during the first quarter, he insisted Tuesday that the company isn't interested in battling cable and satellite TV providers for customers. Rather than bid for rights to offer streaming video subscribers current seasons of TV series--which cable MSOs such as Comcast (Nasdaq: CMCSA) and Time Warner Cable (NYSE: TWC) offer through their free video-on-demand platforms--Netflix will focus on complementing cable and satellite subscriptions by distributing thousands of episodes from previous seasons.

Hastings

"To the degree that we try to be a substitute for cable networks by, for example, having current day and date content, then we get into a cord-cutting kind of battle that's not really in our interest," Hastings said Wednesday on Netflix's fourth-quarter earnings call.

After a losing more than 800,000 subscribers during the third quarter, Netflix regained 600,000 subscribers during the fourth quarter. The company predicted that it will continue to see DVD-only subscribers and customers who subscribe to hybrid DVD and streaming video subscriptions fall, but that it will see steady growth from subscribers that pay it $7.99 monthly for unlimited streaming of TV shows and movies.

Also worth noting from Netflix's fourth-quarter earnings and conference call:

• Don't look for Netflix to be a premium video supplier for any of the virtual multichannel video providers that may be in the works. "I don't think that's going to come into play. Several large firms have tried to put that package together and backed off. I think what we'll see is a continuation of the current localized over your own pipe model," Hastings said, referring to TV Everywhere offerings from pay TV providers.

• The biggest competitive threats to Netflix are TV Everywhere offerings from cable and satellite providers, and sites from cable networks such as HBO Go, Hastings said in a letter to shareholders. "As HBO GO grows and becomes the primary way that consumers experience HBO, it will become a much more effective competitor for viewing time," he added.

• Hastings said he expects Amazon (Nasdaq: AMZN) to pose more competition for Netflix by creating a standalone streaming video service which will cost subscribers less than the $7.99 monthly that Netflix charges streaming video customers.

• Netflix is focused on enabling "binge viewing" with its plan to offer subscribers access to all episodes of Lilyhammer and other original series it is producing, Hastings said. "Our release strategy for original content emphasizes that brand strength, which is to be able to get hooked and pore through those episodes rather than get strung out. And we're not particularly focused on a single show for driving retention. It's the expectation of more and more shows that really drives retention," he added.

• Netflix, which already offers DVD subscribers 3D movies on Blu-ray discs, may add 3D titles to its streaming video library. "That's definitely something we can do and we'll be looking at," Hastings said.

• Hastings said Netflix is "excited about the possibilities of social TV," but noted in a letter to shareholders that the Video Privacy Protection Act prevents the company from integrating its platform with Facebook and other social networks as it has in Canada and 45 other countries. A bill that could reform privacy rules will be debated next week at a Senate hearing.

For more:
- see Netflix's Q4 letter to shareholders (PDF)
- read the transcript from the earnings call

Special Report: Sizing up the cable industry in Q4 2011

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