Netflix Chief Executive Officer Reed Hastings says Blockbuster has closed 10% of its stores in the San Francisco Bay Area, where Netflix has its biggest presence, he says. Overall, Blockbuster says it closed roughly 2% of its stores last year.

For now, the Los Gatos, Calif.-based company has been rapidly adding subscribers. As of Dec. 31, it had 4.2 million subscribers, up 60% from a year earlier.

Netflix is counting on the demise of neighborhood video rental shops to speed its growth. As shops close, more people will turn to online rental services like Netflix, Hastings says.

When Netflix went public in 2002, it set a goal of reaching 5 million subscribers between 2007 and 2009. It had 700,000 subscribers. Now it’s on pace to reach its goal by the middle of this year.

The company’s new goal is 20 million subscribers between 2010 and 2012. “The San Francisco Bay Area is our look ahead,” Hastings said.

To up the pressure on retail rivals, Netflix plans to offer HD DVD and Blu-ray Disc movies from the day they become available. Since few people will own high-def video disc players at first, it wouldn’t make financial sense for local rental stores to stock HD movies. But Netflix can use its Internet business model and nationwide distribution centers to target HD customers.

Movies in the HD DVD format are expected to become available as soon as late March.

High-definition video discs will extend the reign of the DVD as the main choice for viewing movies at home for another decade, Hastings says. Netflix does plan to get into the digital download business, but that could be years away, he says.

Netflix still considers video rental stores, led by Blockbuster, as its main competition. Blockbuster runs 5,500 stores in the U.S. Over the past few years, Blockbuster has closed 100 to 150 stores annually.

The company’s Blockbuster Online service is Netflix’s biggest rival in the online DVD rental field. It has about 1 million subscribers. On Super Bowl Sunday it kicked off a big ad campaign that it hopes will boost its subscriber count to 2 million by year’s end.

Blockbuster Online is offering subscribers one free in-store rental coupon per week in addition to the movies customers receive by mail. It had been offering two a month.

source: Investor’s Business Daily / http://biz.yahoo.com/ibd/060224/tech01.html?.v=1

 

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