Friday, January 29, 2010

Netflix Should Concern Cable Operators

Netflix had a good quarter. A double digit rise in revenue, a 10% increase in subscribers, and riding the way of new TV sets launching internet enabled TVs. "The new subscribers added since the third quarter marked a record for the online rental company, which offers DVDs through the mail and streaming content for 12.3 million customers. Netflix also lost fewer customers in the fourth quarter, as the churn rate, or the number of people who don't renew their monthly subscription, dropped to 3.9 percent from 4.4 percent in the third quarter and from 4.2 percent in 2008's final quarter. The company added nearly 3 million new subscribers over the full year."

So where are those customers coming from? I suspect that cable might have to add Netflix to the list of other competitors, telco and satellite, stealing customers. Netflix is a cheaper alternative to premium services, like HBO, Showtime, and others. And it now offers customers both a mail service and online component. As consumers, especially in a difficult economy, Netflix has emerged as a better positioned entertainment value. Cable needs to wake up and pay more attention to the value and service they provide; Otherwise, customers will pick the lowest price alternative.

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