Industry News Roundup

The US economy may be in the doldrums, but some entertainment providers are sailing along nicely.

In the first week of March, online movie rental service Netflix reported signing its millionth subscriber. One of the few late-1990s Internet startups to succeed in a big way, Netflix reached the million-customer milestone in 3½ years, only about half the time it took America Online to reach the same number. The company is riding the wave of DVD's surging popularity, a phenomenon that put the video industry near the $20 billion gross revenue mark last year.

Netflix's $20/month DVD rental program—with no fixed return dates, no late fees, and prepaid return mailers—has proven enormously popular with movie fans nationwide and within the investment community. The company has a market capitalization of $360 million, and expects to have as many as five million subscribers by 2010.

Direct broadcast satellite service EchoStar also reported good news in early March. After hitting the regulatory wall in its attempt to acquire rival DirecTV, EchoStar set about putting its house in order. The company added 400,000 new customers in the fourth quarter, ending 2002 with 8.2 million subscribers, an overall gain of 20% for the year. DirecTV's subscribership grew by 12% last year, totaling 11.2 million customers.

EchoStar's fourth quarter revenue rose 15% to $1.3 billion, with cash flow up 13%. Despite the gains, the company posted a fourth quarter loss of $715.6 million, including a $600 million "breakup fee" paid to DirecTV for the failed merger, and $90 million in fees related to the merger attempt. Subtracting those fees yields an approximately 40% reduction in net losses from the $42.9 million loss reported for the same period in 2001.

CEO Charlie Ergen said that a major goal for the coming year is to reduce the costs of acquiring new subscribers, and to do everything possible to keep current subscribers from going away. EchoStar projects an additional one million new customers in 2003.

TiVo also narrowed its fourth quarter losses. The San Jose, CA–based manufacturer, whose name is synonymous with "personal video recorder," reported acquiring 115,000 new subscribers in the period, for a total of 624,000. Net loss was $14.7 million, a huge decrease from the $41.6 million lost during the same period the previous year. Quarterly revenue grew to $23 million from $6.8 million during the last three months of 2001.