Netflix: recession proof?

Thanks in large part to its streaming video offerings, Netflix posted a 45 percent leap in fourth quarter 2008 profits, compared to the same period in 2007.

Netflix had 9.39 million subscribers at the end of the quarter, and Chief Executive Reed Hastings predicts the service will break the 10 million mark before the next quarter is finished.

Though it’s not quantified how much of Netflix’s business is due to instant watch services instead of mail order discs, Hastings said it’s "very clear that streaming is energizing our growth."

Hastings said in a conference call to analysts that his company will boost its investments "substantially" in video streaming this year, as only a limited selection from Netflix’s library is currently available over the Internet. This is no surprise, given that the company saves money when it doesn’t have to mail out DVDs or Blu-ray discs.

"We plan to spend as much money as we can with the studios, licensing as much content as we can," he said. "And we are already one of the studios’ largest Internet revenue services."

If Netflix’s streaming video offerings become more popular down the line, it’ll be interesting to see if the company changes its rates and policies. Currently, unlimited streaming is included with subscriptions at no extra charge, no matter how many physical discs are allowed for the subscriber. If, as Ars Technica reports, streaming video is "cannibalizing" Netflix’s DVD rentals, eventually the company will have to alter its pricing to reflect the shift in demand.

But that should be a long way off, anyway. Hastings doesn’t think DVD will peak until sometime between 2013 and 2018.