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Video rental company, Netflix, released 4th quarter earnings Wednesday. Amidst a turbulent economy and increasing competition from both traditional and non traditional rivals. Netflix largely met or exceeded expectations.

The company earned $15.8m (24cents a share) for the quarter ended December 31st. Excluding stock based compensation, earnings were $17.8m (27cents/share) on revenue of $301.7m. Revenue was up 9% over the same period last year.

Wall Streets consensus expectation was 14cents a share on revenue of $301.7m.

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Following Warner Brother’s surprise announcement to back the rival Blu-Ray standard, the HD DVD camp canceled parts of their planned CES promotions and made a measured statement that they would “evaluate potential steps.”  Wasting no time, it appear’s they’ve made a decision: the next generation DVD format war will now be a price war. 

Beaten and battered by the decision of five of seven major Hollywood studios to bake their rival, Toshiba is striking back with price cuts and a planned marketing blitz. Toshiba said Monday that they will dramatically cut prices on their HD DVD lineup.  The last expensive player, the HD-A3, will drop from $299 to $149.  The high end unit in the product line will drop from $499 to $299.

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Preempting a largely expected iTunes movie rental announcement at tomorrow’s Macworld event, Netflix announced they’ll remove all usage quota restrictions on their “Watch Instantly” streaming video service.  The change is to become effective today.

The streaming video service, on which Netflix has reportedly invested more than $40m, has been available for much of the past year.  It allows existing Netflix subscribers to watch on-demand feeds of up to 6,000 titles.  There are no additional costs to use the service.  It is offered in addition to subscriber’s existing mail order rental allotments.

Until today, the one major restriction on the service had been the quota system Click to Read More

Microsoft opened the Consumer Electronics Show with the boast that their Xbox Live on-demand platform would soon offer more than double the number of titles available on demand from Cable and Satellite providers.  Not to be out done, Comcast, the nation’s largest cable TV provider (and 2nd largest broadband service provider) used the trade show stage as opportunity to issue a reply.

During another keynote, CEO Brian Roberts unveiled several content initiatives Comcast has planned for 2008. Click to Read More

In addition to Bill Gates keynote, Microsoft launched the Consumer Electronics Show Sunday evening with four Television related press releases and product announcements. 

• MGM & Disney/ABC on Xbox Live
Headlining the list was Microsoft’s announcement that, Xbox Live, their internet platform for delivering video on demand through the game console, will soon offer an on-demand library of content double that available through cable and satellite services.   

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In 1970 the Video Cassette recorder was launched at the Consumer Electronics Show.  In 1996, the DVD was revealed. 2003 was the year Blu Ray launched.  This year, Toshiba had big plans for their HD DVD format.   That is, they had big plans until Friday when Warner Brother’s pulled the rug out from under their planned party.   Now, instead of a celebration it’s looking more like a funeral.

For the last year, Sony’s Blu Ray and Toshiba’s HD DVD had been fighting an open, and hostile, battle to claim the title of approved standard for high definition DVD.    Money and incentives were being offered and sides being taken.  In one corner there was Sony backing Blu Ray.   In the other, Toshiba, sponsor of HD DVD.   Movie studios, rental companies and gaming companies were forming alliances.    

Lions Gate, Fox, Disney and MGM had sided with Blu Ray.  Blockbuster was also pushing the disks in its stores.  Microsoft, on the other side, was stumping for HD DVD with the Xbox platform.  So too was Intel.  Warner Brother’s and Paramount were Switzerland. They remained Neutral.

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In October’s 3rd quarter earnings conference call, Netflix’ CEO Reed Hastings spent a few minutes talking to analysts about the slowly converging worlds of video distribution.  In those comments he expressed three long term goals: “one, to expand the content [they] offer online; two, to make it inexpensive and easy for consumers to view that content on the television; and three, to understand what the financial model for the hybrid service will be in the long term.”  Today, Netflix took a step toward realizing goal number two.

Late Wednesday the DVD-by-mail rental service announced a partnership to bring movies straight to the TV over the Internet.  The new service, which will not be available before June, expands on Netflix’ year old “Watch Instantly” functionality by removing the requirement to watch streams through a computer.

The service will rely initially on hardware manufactured and sold by South Korean electronics giant, LG.   Using a dedicated set top box, or equivalent functionality bundled into a DVD player or other hardware Click to Read More