2011: The year of living Netflix

by Michelle McGinnis on Friday, December 31, 2010 in Digital Marketing

If you missed the headlines yesterday, Hitwise released its list of top search terms in 2010, and Facebook continued its dominance taking the 1st, 2nd, 6th and 9th slots in the ten most searched terms.

Lost in all the Facebook hoopla was the emergence of Netflix into the 50 most searched terms. I gave a quick call to Hitwise spokesman Matt Tatham and it turns out Netflix was actually the 18th most searched term this year and accounted for 9.07% of all searches in Hitwise’s movie category.

What this indicates is that Netflix is well positioned to continue its dominance of home movie viewing in 2011.

Netflix is having a banner year. According to the company’s third-quarter financial statement, Netflix has just over 16.9 million subscribers, a 52% increase over the year before. GAAP net income grew to $38 million in that quarter, just short of an $8 million increase over the year before. And here’s the kicker: The percentage of those nearly 17 million subscribers who streamed 15 minutes or more of a TV show or movie grew from 41 percent to 66 percent.

Simultaneously, demand for devices that make streaming Netflix via TV appears healthy. Apple TV just crossed the 1 million devices sold mark. The Roku is also expected to reach the million mark. And the Boxee is doing better than the company expected.  Take a look at all the Netflix stickers on the boxes for these devices and you’ll notice it is the major selling point for them.

When you add these stats together it means that Netflix is becoming the portal for professional video content. The subscriber base is booming and the amount of people actively looking for the company is rising at a rapid clip. This is just with a US presence. Reports this week suggest Netflix is now looking at international expansion.

So what?

This indicates that Netflix is positioning itself as the gateway for streaming TV shows and movies, a kind of portal for the movie world. That is grabbing the attention of the major TV and movie studios, and their advertisers. Some content providers will try to put the squeeze on Netflix by raising licensing fees that have to be passed down to consumers. But that becomes increasingly difficult to do as the company’s subscriber base, and leverage, grows.

Here’s a prediction: In 2011, some studios will see the folly in trying to be beat up Netflix and instead will attempt to ink deals with the company. Content providers will look to pay premiums for prominent placement. Other advertisers will seek ways to get in front of Netflix’s audience. Crazy, you say? Not that long ago it would have seemed crazy to show minute after minute of commercials to paying moviegoers – now it’s an accepted practice.

Ad dollars might seem enticing to Netflix as an added revenue stream. But the company will need to be careful. It doesn’t want to stunt its growth or turn off current subscribers, particularly as it tries to differentiate itself from Hulu – another new entry in the most searched terms of the year.

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