Netflix said Thursday that its movie rental service will be embedded into Samsung's next-generation Blu-ray DVD players.
The move is the latest turf grab for Netflix, which offers its own player in partnership with Roku and distributes its service via Microsoft's Xbox platform. Netflix also has an electronics deal with LG Electronics. In addition, Netflix streams movie rentals online to subscribers.
In a statement (Techmeme), Netflix and Samsung announced a broad partnership to offer instant movie streaming via "a range of home entertainment products." Initially, Netflix streaming will be offered through Samsung's BD-P2550 and BD-P2500 players, which will run you $399.99.
While it's unclear whether the Samsung pact will lead to a bevy of new subscribers for Netflix, but the online movie service is being diligent about getting its newly bolstered library in front of consumers everywhere.
In the long run, these deals are really about transitioning Netflix's business model to digital distribution. Today, Netflix depends on delivering DVDs through the mail.
A more immediate concern for Netflix, however, is a slowing economy. On Monday, Netflix warned that its fourth quarter revenue and subscribers would fall short of expectations. Here's what is worrisome: Netflix has lowered is subscriber targets twice in two weeks. For the fourth quarter, Netflix projected subscribers of 8.85 million to 9.15 million at the end of 2008 with revenue of $351 million to $357 million. Those targets are down from new guidance given just two weeks ago.
Netflix CEO Reed Hastings said net subscriber additions are down 30 percent in October compared to a year ago. Here's the money quote from Hastings from the Netflix earnings conference call on Monday:
A quarter ago in July, I told you that we appeared to be substantially unaffected by the then economic climate. Since July, however, the economy has deteriorated markedly. It now appears that the recession means continued subscriber growth for Netflix but not as vast as last year...In summary, we are in the midst of challenging times that have shaken consumer confidence across the country. But the fact is the people continue to be attracted to the Netflix service and our business continues to grow in both subscribers and earnings. While the economic environment is out of our control and volatile, what is in our control is executing on our strategy, delivering great service with DVDs and instant streaming, and remaining flexible in a fluid environment.
Overall, Netflix reported solid third quarter growth, but clearly isn't immune to an economic slowdown. The company ended the third quarter with 8.67 million subscribers, up 23 percent from a year ago and up 3 percent from the second quarter. Netflix reported net income of $20.4 million, or 33 cents a share, on revenue of $341.3 million, up 16 percent from a year ago. Excluding charges, Netflix reported net income of $22.1 million, or 36 cents a share.