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Summary:

If you aren’t impressed enough yet by Netflix (NSDQ: NFLX), the good folks at research firm Screen Digest shared some subscriber-only analyt…

Netflix

If you aren’t impressed enough yet by Netflix (NSDQ: NFLX), the good folks at research firm Screen Digest shared some subscriber-only analytics on the streaming service at the Future of Film Summit earlier this week that were both compelling and confusing. Let’s put it this way: The growth of Netflix’s streaming business led to a forecast for renewed growth for…DVD and Blu-ray disc rentals? Allow me to explain.

First, some stats:

–Netflix revenues for 2010 will be $2.2 billion, projects Screen Digest–that’s roughly equal to the amount the entire U.S. retail rental business will muster for the year. Spending on that latter group will be down 33% from the previous year, largely due to the collapse of bankruptcy-filed Hollywood Video and Blockbuster (NYSE: BBI).

–Netflix snail-mail business will account for 35% of disc-rental spending in the U.S. this year, up from 26% in 2009. Second only to Netflix by that measure: Blockbuster, with 20%.

–Coinstar’s Redbox is third, with 19%. But even though the kiosk business had a great year overall, growing 44% to $1.4 billion, Screen Digest forecasts maturation will set in soon for this “rapidly saturating” offering.

–Citing Netflix’s Q3 data point that the number of subs who sampled streaming grew from 40% in Q3 2009 to 66% in the same quarter this year, analyst Michael Arrington observed, “If Netflix had not introduced streaming in early 2007, Screen Digest believes that its subscriber growth would have reached a plateau, likely in the 9m-11m range.”

–Spending on the entire disc-rental business is down 4.3% from 2009, to $6.2 billion. That number has been steadily dropping since hitting its high of $8.5 billion in 2001.

All this, and yet…Screen Digest is actually projecting growth for disc rentals next year through 2014, where it’s projected to hit $7.4 billion.

To which you might say…huh?

The confusion here is caused by the fact that Netflix can’t separate streaming revenues from those derived from its envelope-based business. So while its subscription growth is being propelled by streaming, those numbers end up inflating projections for disc rentals–a category that seems to be deteriorating in every other way. And it may stay that for a while given that Netflix has only begun streaming sans envelopes in Canada and in a few test markets in the U.S.

All Screen Digest can do for now is place a “big asterisk” on its DVD-rental projections, though Arrington recommends one Netflix disclosure that would help: quantifying how much video is watched on streaming vs. disc.

Take it under advisement, Reed Hastings.

P.S. New research from In-Stat on the VOD marketplace covers somewhat similar ground, but concludes, “Revenue from retail video disc sales and rentals will be in decline, with no leveling in sight.”

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  1. So why have Netflix insiders sold so many shares recently?

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