Peter Kafka

Recent Posts by Peter Kafka

Are One in Five Netflix Subscribers Watching Online?

Netflix executives spent a lot of time yesterday playing up the success of their online streaming video offering: They said the appeal of the program, which offers free on-demand movies and television to most of their customers, helped them wrangle more subscribers than anticipated and let them beat Wall Street’s already heightened expectations.

I can attest that the streaming service is indeed excellent–enough so that I’m likely to drop my subscription to Time Warner’s (TWX) HBO very soon. What I can’t tell you is the number of Netflix subscribers who are actually using the service, because Netflix (NFLX) isn’t offering up any real data about the program–only that “millions” used the service in the last quarter.*

But! That data point alone is enough to suggest that more than 20 percent of the company’s subscribers are using the service.

Here’s the algebra, courtesy of Barclays Capital’s Doug Anmuth: Netflix ended the quarter with 9.4 million subscribers. If “millions” means at least two million, than that means at least 21 percent of the company’s customers use streaming–while continuing to use DVD and Blu-ray discs.

That strikes me as a fairly astonishing number, given that it’s still not a simple process to get Netflix’s stuff on your TV, where you can best appreciate it. There’s now a handful of devices, like Roku’s specialized box and Microsoft’s (MSFT) Xbox 360, designed to get the company’s movies and shows on your big(ish) screen, and more on the way, like LG’s TVs that come prewired for the service.

But most of this stuff is getting viewed on viewer’s laptops, Netflix says. Just think of what the adoption rate will be like when that switches to TVs.

*A reader suggests that Netflix may not mean millions of viewers, but millions of views, or some other obfuscation. I thought about that one, too, and double-checked Hasting’s remarks, via Seeking Alpha. Here’s the relevant excerpt: “Our existing subscribers are watching instantly in ever greater numbers and in just the last month millions of our subscribers got more value from their Netflix subscription by streaming.”

Bear in mind that these are his scripted remarks, pre Q&A. So it seems to me he was being very deliberate here — he’s got a lot of folks using his Web service, and he wants to brag about it.

[Image Credit: jeffgunn]