Analyst: Consoles To Create 3 Million New Netflix Users In 2010

Offering its services on connected consoles has "meaningfully" boosted video rental service Netflix's subscriber base, says Wedbush analyst Michael Pachter. "We believe that the Xbox 360 helped Netflix add 800,000 customers in 2009, a figure that we had expected the PS3 and Wii to each replicate in 2010," Pachter says. But growth is beating expectations. The analyst estimates that each console -- currently Wii, Xbox 360 and PlayStation 3 all support Netflix digital rentals, although Wii and PS3 require a special disc to be in the drive -- could create 300,000-400,000 new subscribers a year for the service, assuming a 5-10 percent conversion rate of new owners. That will ultimately mean around 3 million new subscribers from all three consoles in 2010, the analyst concludes, and then 900,000-1.2 million new subscribers thereafter. Pachter says Netflix CDs for Wii owners, the last to receive access to the service via console, began shipping last Monday. "In our opinion, Netflix on the Wii will not be as popular as it is on the Xbox 360 and the PS3 for two main reasons: the lack of HD on the Wii, and the limited number of Wii users connected to the Internet," he says. "Further, the Wii audience has demonstrated little commitment to buying videogames (attach rates are at historical console lows), leading us to suspect that many Wiis are relegated to the playroom or (heaven forbid) the closet." But Netflix's new iPad app is one of the most-downloaded third party applications, says Pachter, although while it will continue to be popular, "this popularity may not translate into a meaningful number of new subscribers, as we expect that a large portion of the the iPad’s tech-savvy clientele already have a Netflix subscription." Earlier this week, Netflix reported first quarter earnings up 44 percent year over year, with profits of $32.3 million and sales up 25 percent to $493.7 million. In total, the company added 1.7 million new subscribers in the quarter alone, bringing it to a total of around 14 million users.