September 6, 2007, 12:00 AM

Netflix subscribes to a bright future for movie rentals

There’s still plenty of growth left in the online movie rental business with as many as 20 million new subscribers still left in the market, Netflix CEO Reed Hastings says.

Mark Brohan

Research Director

Despite the ongoing horse race between Netflix Inc. and Blockbuster Inc., there’s still plenty of growth left in the online movie rental business, Netflix CEO Reed Hastings is telling Wall Street.

In fact the market could still add as many as 20 million new subscribers over the next several years, Hastings told analysts on the company’s recent second quarter earnings call. “The online rental segment as a whole is growing quite remarkably,” Hastings said. “In the most recent 12 months online additions accelerated to approximately 3.7 million subscribers.”

The market will also continue to add more subscribers even though more stores will close as customers use the web and the mail to rent DVDs. “As Internet commerce continues to mainstream, and as video stores close, the prospects for online rental to add over 4 million net new subscribers over the next year are strong,” Hastings told analysts. “If online rental stays on that 4 million per year track for three years, that would be more than 20 million online subscribers by mid 2010.”

Over time Netflix, No. 18 in the Internet Retailer Top 500 Guide, sees the majority of movie rentals being generated online. “Consumers are choosing online DVD rental in ever greater numbers due to its superior value, convenience and selection,” Hastings told analysts.

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