Netflix Wants to 'Get Along with Everyone,' Not Facilitate Cord-Cutting

Anticipates Stand-Alone Streaming Service From Amazon as Potential Challenge

By Published on .

Most Popular

Netflix wants to "get along with everyone" and isn't interested in facilitating cord-cutting, CEO Reed Hastings said in a conference call Wednesday to discuss the company's latest financial results.

The company has no plans to bid on the rights for current seasons of TV shows, instead positioning itself as better suited for "catch-up television," Mr. Hastings said. "We would rather be additive to cable, not competitive," he said.

The strategy seems designed to alleviate TV networks' concerns that Netflix could disrupt their lucrative business model. Netflix is already losing Starz content next month, in an example of those concerns' impact, reportedly because it refused the network's demand to put Starz content on a premium tier costing subscribers extra.

To differentiate itself, Netflix has been investing in its own original content, with its first series, "Lilyhammer," arriving next month. Netflix will release all eight episodes of the first season on Feb. 6 instead of rolling out one a week, letting viewers binge rather than stringing episodes out.

Fresh content from traditional networks would help attract subscribers, but Netflix also said Wednesday that it has already reversed the decline sparked by last year's price hike. Netflix increased U.S. subscriptions by 600,000 in the fourth quarter, recovering some of the 800,000 U.S. users it, the company said as it released better-than-expected quarterly results.

Total domestic subscribers numbered 24.4 million at the end of 2011, Netflix said.

Profit declined 13%, to $41 million, as more lucrative DVD subscriptions continued to fall. With subscriptions rising again and improved margins on streaming customers, however, Netflix located potential challenges in competition from video providers such as Amazon Prime, Hulu and HBO.

"We expect Amazon to continue to offer their video service as a free extra with Prime domestically but also to brand their video subscription offering as a stand-alone service at a price less than ours," Mr. Hastings said in a letter to shareholders before the conference call, echoing a New York Post report Wednesday morning. Amazon offers streaming content as part of its Prime free-shipping service for $79 a year.

But Amazon and Hulu aren't likely to steal much market share from Netflix, Mr. Hastings wrote. "Both Amazon and Hulu Plus 's content is a fraction of our content, and we believe their respective total viewing hours are each less than 10% of ours," his letter said.

Hulu's $7.99 monthly subscription service is priced the same as Netflix's streaming product, and Mr. Hastings said consumers prefer "commercial-free Netflix over commercial-interrupted Hulu Plus ."

TV Everywhere, particularly HBO Go, represents the most serious long-term threat to Netflix, according to Mr. Hastings' letter. "HBO has some great content, particularly their original series, but today for most people it is locked behind a linear interface, or at best behind a DVR interface, and in all cases tethered to a linear subscription plan," he wrote. "As HBO Go grows and becomes the primary way that consumers experience HBO, it will become a much more effective competitor for viewing time."

On the earnings call, Mr. Hastings said Netflix has no intention of marketing its DVD business this year. "We expect DVD subscribers to decline ever quarter, forever," he said.

In this article: