Netflix (NASDAQ:NFLX, news, filings) reported fourth quarter results that beat all expectations yesterday. Their subscriber count rose to 9.4M, a rather unexpected number since just last quarter they reduced the upper end of projections from 9.25M to 9.15M only to blow past both. Revenue was $359.6M and from that the company managed to earn $0.38 per share. But doesn’t Netflix sell to consumers who have spent the last three months cowering from the economy and deciding what to cut from their budgets?
It’s quite simple, Netflix seems to have designed a user experience for streaming video to the TV that people actually like. That’s no small accomplishment, it has been the real sticking point for a long while despite all the noise about reliable download speeds. The Watch Instantly service is becoming available on additional devices, offering more and more choice to buyers, and it would seem that this quarter’s success is just the beginning of the ramp. Netflix clearly doesn’t see it as a fluke, their Q1 revenue estimate of $387-393M implies some momentum.
So who else may benefit from the success of Netflix? Those that stream video for Netflix of course, which are Limelight Networks (NASDAQ:LLNW, news, filings) and Level 3 Communications (NYSE:LVLT, news, filings). While every bit helps, the revenues likely derived from this success are small relative to Level 3’s total. But in the case of Limelight this would seem to bode well for their fourth quarter numbers. More importantly, both may see more growth than previously expected from Netflix’s corner in 2009 which may help take the edge off a difficult economy.
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“Staycations” are replacing vacations, and Netflix provides cheap entertainment.
And the TiVo HD interface to Netflix is pretty convenient too–though it got me to reduce my Netflix subscription back to a single DVD at a time.