Netflix CEO Reed Hastings gave a de-facto timeline for the company to convert to mostly-digital distribution: 5 years. That’s the time frame in which he believes the mail-order DVD business will peak and then start to decline. Hastings to Netflix’s (NFLX) investor day in San Francisco, via Reuters:
We think the by-mail business is very strong but will probably peak in the next five years. Our key challenge is growing earnings per share and subscribers while funding streaming which should give us years of subscriber and earnings expansion.
The big “if” here is whether Netflix can figure out a way to deliver digital movies/TV shows on enough devices to appeal to consumers, and if it can get access to digital films on more favourable terms than Apple’s (AAPL) iTunes, Amazon’s (AMZN) Unbox, or other competitors. Netflix has already said it is working with four device manufacturers and we know two of them: LG and Roku. The other two could include a video game console (Xbox?) or a TV manufacturer.
In the meantime, the mail-order DVD business has a little runway left. Hastings says the company will have 10 million subscribers by next year.
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