Netflix praises Canadian expansion, portends early profit

The US company's Q4 report forecasts a profit for by Q3 of this year. Also announced is a future integration with Facebook.

Netflix’s meteoric rise includes Canada.

The US internet subscription giant on Wednesday released its fourth quarter 2010 earnings, with notice that its newly launched service will be profitable by the third quarter of this year.

‘We expect our Canadian operations to have a positive operating margin in Q3. We expect to have approximately $50 million in operating losses in international in the second half of 2011 as we expand beyond Canada,’ the company said in a statement along with its latest financial results.

Netflix said it hopes to have around 900,000 Canadian subscribers paying $7.99 a month for its pure streaming service by March 2011.

In the shareholder letter accompanying the results, the company also stated that a future Facebook integration with the online service is in the works – details were not provided – and that it is evolving its business model toward personal accounts rather than household accounts, a model based on its original DVD mailing service.

‘With this shift, we are starting internally to think of our available market as the number of active mobile phones in a territory, rather than the number of households, because that is the number of people who have the means to subscribe to a service like ours.’

Netflix also warned, however, that bandwidth caps imposed by Rogers and other Canadian content carriers could frustrate internet access subscribers here and slow the US online streaming giant’s expansion into Canada.

‘It’s something we’re definitely worried about, my sense is…many [subscribers] don’t understand their plan and it will take a billing cycle or two for them to figure it out,’ Netflix CEO Reed Hastings told analysts during a Wednesday afternoon conference call.

‘It is potentially a significant negative for Netflix,’ he added

Canadian internet service providers started reducing data limits for monthly online access subscribers once Netflix expanded into Canada last fall, and now charge a premium for over-consumption.

From Playback Daily