Netflix may be getting out of the DVD business sooner that previously predicted, if Wednesday’s fourth quarter 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 the fourth quarter, 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 the third quarter. That means 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 81,000 US subscribers in the third quarter 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 the fourth quarter, that combined subscriber number once again grew by 610,000.

Netflix executives have long said 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 UK 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 that he expects DVD subscription cancellations 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 (~$50 million), and the sequential increase in our international losses (~$50 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.

Source http://gigaom.com/video/netflix-streaming-vs-dvds/

BSkyB will use its new Internet TV service to target a wider audience for its content, with the aim of attracting traditionally non-Sky homes to start watching at least some Pay TV programming and movies. The new service, scheduled to launch in the first half of 2012, will have its own subscription or pay per view options and will be independent of having a Sky satellite subscription. It will be available over any broadband connection.

BSkyB already provides the option to subscribe to its services online only, through its multi-screen Sky Go offer, but has never seriously marketed the fact because the positioning for Sky Go is really about adding value for existing customers. In contrast, the whole point of the new service is that you can start watching Pay TV content without the traditional package, removing the requirement for a satellite dish or set-top box.

Sky is the UK’s largest Pay TV operator with over 10 million satellite subscribers and a rapidly growing base of broadband and voice customers. The company also has rights to some of the most popular pay content and has been building the profile of its own channels like Sky 1, Sky Arts, Sky Living and Sky Atlantic (offering exclusive HBO content). It is also investing heavily in original production. It has negotiated multi-screen rights for much of what it shows, including movies and sports, and now it wants to make the best possible use of these rights by making the content available as widely as possible. Sky Movies will be available from launch and the new service will expand to offer sport and entertainment soon afterwards.

With broadband speeds increasing and the rapid penetration of connected devices, the company thinks this is a good time to target a wider audience using OTT (over-the-top) delivery. The Sky brand is strong in the UK and the company is confident that in many non-Sky homes consumers are aware of what it offers, like the look of Sky products but are just not ready for the commitment required for a full satellite package. So a key part of the strategy is that the new service will have a more flexible bundling and pricing structure. Though there are few details yet, Sky has announced that there will be no minimum contract and there will be a variety of pricing options. For example, people will be able to pay monthly for unlimited access to Sky Movies or rent a single movie on a pay-as-you-go basis.

Read more at http://www.v-net.tv/