Riding the growth in consumer demand for online renting of DVD movies, Netflix Inc. expects to reach $1 billion in revenue and 5 million subscribers within four to six years, up from $153 million and under 1 million subscribers last year, CEO and co-founder Reed Hastings tells Internet Retailer. Hastings says Netflix will emphasize customer service and fast deliveries to gain more of the current $10 billion market for DVDs rentals, most of which still occur through physical stores.
“The key to their growth is about 40 million DVD households, which will probably double to 80 million in five to seven years,” says Safa Rashtchy, an analyst with U.S. Bancorp Piper Jaffray who follows NetFlix.
Hastings adds that Netflix will also consider online rentals of a broader assortment of products, such as video games and books. "It`s certainly possible that we`ll apply our process to other products," he says.
Analysts say that may require Netflix to defend in court its recently received patent on its process for renting and shipping DVDs--a process already being copied by Wal-Mart Stores Inc.`s WalMart.com and others in DVD rentals. For a monthly fee of $19.95, Netflix will ship an unlimited number of DVDs to a customer, who can keep up to three DVDs at any one time without incurring late fees or shipping charges. As the customer returns each DVD in a pre-paid mailer, Netflix sends out a replacement from a list the customer`s preferences. Wal-Mart is offering a similar service.
But whether Netflix will seek legal action to enforce its patent remains to be seen, Hastings says. “We’re studying our options,” he says. “Our main focus is on providing a great customer experience. That’s how you win as a consumer brand.”