Netflix had what could be its best quarter ever, and by all accounts it appears to be a direct result of the company’s Watch Instantly streaming service. Based on the company’s actual results, as well as comments from Netflix CEO Reed Hastings on the company’s first-quarter earnings call, it seems clear that the online video service is contributing positively on a number of fronts, including lower churn and lower subscriber acquisition costs.
Hastings said on the call that Netflix attributes this quarter’s record low churn to an increase in streaming. Moreover, the company’s investment in streaming titles, as well as the availability of the service across multiple devices and an improved user interface, is driving more subscriber additions through word of mouth, therefore lowering Netflix’s cost of adding new subscribers.
Over the last several months, Netflix has been striking deals with Hollywood studios Warner Bros, Fox, Universal and HBO, in which it agrees to a 28-day window before it can rent DVD releases by mail, and in return receives discounts on DVDs. The company then pours those savings into licensing more content for its streaming service. Some subscribers have complained about the lack of new releases, but on a whole the strategy appears to be working for the company, as it continues to add new subscribers at record levels.
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