Netflix grows as economy shrinks

Future LG Blu-ray players will include access to Netflix streaming movies
Future LG Blu-ray players will include access to Netflix streaming movies

Your job's moved to India, your house is worth less than a cardboard box and you can't get a loan - sounds like the perfect time to rent a movie!

Online film rental company Netflix just announced its latest figures and they're better than ever.

The fourth quarter of 2008 saw the company reaching a subscriber base of nearly 9.4 million. That's two million more users than the company had at the same time last year.

Posting good results

The service revolves around users who pay a monthly fee for unlimited DVD rentals, or Blu-ray rentals by post. The company has also expanded into online streaming through either PCs, set-top boxes or Blu-ray players.

However, Netflix is still suffering high levels of churn. The fourth quarter saw over 2 million new subscribers join, but 1.3 million existing customers leave its service: a net gain of just 718,000 users.

At any one time, about 2 per cent of its users (currently around 188,000 people) are on free introductory offers.

Despite this, the company earned a healthy $1.37 billion (£980 million) during last year and expects to grow that to $1.6 billion (£1.1 billion) in the year ahead. This will be at least partly due to the drop in the advertising cost of getting new subscribers, which is currently at $26 (£18.50) down from $35 (£25) in 2007.

Mark Harris is Senior Research Director at Gartner.