A strong quarter for Netflix

Packages of DVDs await shipment at the Netflix.com headquarters in San Jose, Calif.


Scott Jagow: Later today Netflix is expected to announce fourth-quarter earnings, and they're expected to beat Wall Street's expectations. Rico Gagliano tells us why Netflix is doing so well.

Rico Gagliano: The jargon term for it is "trade-down." That's when people forego one pricey item for something similar that costs less. And in this economy, many consumers seem to be trading down from a $30 night at the movies to $8.99 a month for Netflix.

Jason Avilio is an Internet analyst with Kaufman Brothers:

Jason Avilio: So in an economic environment where people are looking to penny-pinch, Netflix's value is a strong one.

But competition looms. This month, Blockbuster announced it'll expand its digital business, eventually streaming movies to computers and other devices just like Netflix. And Avilio says a strong fourth quarter doesn't make Netflix recession-proof. Especially since it lowered expectations last quarter.

Avilio: At the end of the third quarter, they announced they were not going to hit their subscriber growth goals. And now they're beating recently-reduced fourth-quarter goals.

Netflix won't comment on earnings numbers until after its official announcement tonight. But you can bet struggling media companies will analyze that data to see if the company's success is the kind that can last.

In Los Angeles, I'm Rico Gagliano for Marketplace.

About the author

Rico Gagliano is the host of Dinner Party Download.


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