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I’ve been a long time Netflix customer.  I begrudgingly tolerate Netflix’ well documented throttling practices. (For those unfamiliar: throttling was the name applied to the intentional slow down of deliveries to insure an revenue maximizing ratio of movies delivered per rental fee).  I also tolerate little annoyances like bonus-feature discs (eg/ a disc with nothing on it but directors commentary and deleted scenes) being counted as a separate rental, or the lack of availability of an occasional title.  As a movie fan, I used to hate going to rent a film only to find my local store had none available, nor anything else I wanted to see. Netflix’s larger pool of titles, the convenience of home delivery service and lack of late fees won me over despite the occasional frustrations.

Netflix retains my business today because they have provided the best service of its kind.   They offered a real value. Now, in the increasingly competitive and bloody battles of the movie rental world, that value proposition is degrading.

Netflix is due to announce earnings January 24th.   The expectation is that both subscription and revenue numbers will be up and I imagine, will exceed expectations.  It’s also expected that battles with Blockbuster and ongoing litigation are taking a toll. Operating expenses, including heavy marketing costs (to fight Blockbuster), as well as legal expenses, will be way be up year over year. Whatever the numbers, or the reaction from The Street, Netflix faces a difficult future. In the spirit of analyst’s reviews around earnings announcements, here are three talking points from a list of their troubles:

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Peer to peer architectures can be a very efficient method of sharing content or copying large files across networks.  From Napster to Kazaa to Bit Torrent, their use has been well tested, and proven, for different types of downloads (legality notwithstanding).  Peer to Peer concepts also can be efficient and functional when working with content that is "time present" (e.g. Real Time Streaming as opposed to the delayed use of a file that cannot be accessed until fully downloaded). Skype proved this in the internet telephony marketplace.   

Given peer to peer architecture’s ability to work with both time present and time delayed data, it’s only a small logical leap to envisage peer to peer architecture applied to other arenas.

The previously code named “Venice Project” was recently unveiled as such an application for streaming television content.  Skype founders, Niklas Zennström and Janus Friis, began the project with some of the proceeds following the sale of Skype to EBay for more than $2.5b in 2005.   

The new company, Joost (pronounced "juiced"), is set to allow consumers to watch ad-supported TV online through a downloaded software client.  The underlying architecture is reported to be based on similar peer to peer structures to those the two previously developed for Skype. 

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General Electric (NYSE: GE), parent company of NBC Universal, reported Q4 earnings.

Of the company’s entertainment properties, the NBC Universal Segment showed profit at $841m up from $801m, with revenue up 1% year over year.

Additionally, following a poor 4th place Nielsen rating for NBC TV in the prior season, prime time and non-news ratings were rebounding in December thanks to the success of the breakout hit Heroes and NFL Games broadcast under the  new long term deal (signed in April and valid through 2011) with the NFL.  Cable channels USA Networks, Bravo, and CNBC continue to do well with audiences.

More detailed press coverage of GE’s finances can be found at:

Yahoo Finance
Google Finance
Marketwatch

General Electric (NYSE: GE), parent company of NBC Universal, reported Q4 earnings.

Of the company’s entertainment properties, the NBC Universal Segment showed profit at $841m up from $801m, with revenue up 1% year over year.

Additionally, following a poor 4th place Nielsen rating for NBC TV in the prior season, prime time and non-news ratings were rebounding in December thanks to the success of the breakout hit Heroes and NFL Games broadcast under the  new long term deal (signed in April and valid through 2011) with the NFL.  Cable channels USA Networks, Bravo, and CNBC continue to do well with audiences.

More detailed press coverage of GE’s finances can be found at:

Yahoo Finance
Google Finance
Marketwatch

“Making up for lost time” and “better late than never” underscore some of Microsoft’s efforts to compete and keep up with Google.    

Given Google’s published mission to organize the world’s information and make it universally accessible and useful, efforts to digitize and index vast libraries is a natural way point on their roadmap.   With efforts over the past year Microsoft has been both catching up and making sure that road is at least a two lane highway.

With a deal widely announced in October, Microsoft partnered with high speed scanning service firm Kirtas Technologies to advance its efforts.  Kirtas’ services allow Microsoft scan as many as 2400 pages per hour.  While October is way back on the calendar from the point of breaking news, the deal, and the ongoing arms race between Microsoft and Google to sign up library/content partnerships makes it as timely as ever – and escalating

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Apple  (NASDAQ: AAPL), reported Q1 earnings.

Profits were up to $1b ($1.14 share) compared to $565 m ($0.65 share) the prior year.   Revenue was at $7.1b up from $5.7b and well ahead of analysts forecasts of $6.42b
iPod sales accounted for $3.43b of revenue

iPod shipments were up over 50% 5o 21.1m units.   Gross margins for the company beat estimates and hit 31.2%.  Some analysts were estimating that that iPod margins were up more than 400 basis  points to around 30% and Mac margins were up slightly less to around 32%.

Sales guidance for the March quarter estimate sales in the range of $4.8b with profits in the range of $0.54 a share  – both numbers below analysts initial estimates of $5.24b and $0.60 a share.

More detailed press coverage of Apple’s finances can be found at:

Yahoo Finance
Google Finance
Marketwatch

It’s still very early in the year but today, Cambridge MA based Brightcove announced the closing of the largest venture round of the year.  The two and a half year old Internet TV (and Ad Network) startup closed a $59.5 m series C private placement.  The round added a number of strategic corporate and international investors to Brightcove’s slate of stockholders which now includes:  AOL/Time Warner, General Electric, Accel Partners, Allen & Company, General Catalyst Partners, IAC/Interactive Corp, The New York Times, The Hearst Corporation, Brookside Capital and Transcosmos Investments (Japanese firm which also has money in CinemaNow).

The financing was a private placement in which Morgan Stanley and Allen and Company acted as placement agents. The capital, according to press releases, is earmarked for international expansion.  It may also be used to secure additional partnerships or even efforts toward consolidation in the developing, but crowded Net TV market.  (Brightcove acquired Metastories in March 2006, and could be out to buy up other companies to enhance its offerings).  

Notable to me is not so much the size of the deal (though it’s large) but the involvement from major media companies like the New York Times and Hearst co.  Brightcove has gained the confidence of many traditional media companies and this stands to expand those relationships.

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