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Consoles expected to grow Netflix subs by 3m

Significant 2010 growth predicted by analyst, but Wii could make least impact

Wedbush analyst Michael Pachter has predicted that games consoles will boost Netflix subscriber numbers by around 3 million in 2010.

Pachter estimated that the Xbox 360 had helped Netflix to add around 800,000 users to its service in 2009 - a figure that he had initially expected to see both the PlayStation 3 and Wii replicate in 2010, when they began offering the service.

However, "subscriber growth exceeded our expectations in Q1," he said. "And the company increased full year subscriber guidance by 1 million, implying that contribution from the consoles may be running closer to 3 million this year."

In its latest Q1 financials, Netflix revealed that the number of its subscribers that were actively streaming content grew to 55 per cent of overall user numbers, up from 48 per cent in 2009.

Pachter put that growth, in part, down to the company's push to become the "de facto viewing medium of choice" on the consoles.

He added that once Netflix had saturated the installed base of consoles, however, new console subscribers would be limited to a percentage - estimated at around 5-10 per cent - of new consoles sold in the US each year. That would equal 300,000-400,000 people, per console, or between 900,000 and 1.2 million between them.

Pachter expressed doubt that the Netflix service would be as popular on Wii as on its two rivals, though, citing its lack of HD output and the limited number of Wii users connected to the internet as reasons why.

"Further, the Wii audience has demonstrated little commitment to buying videogames (attach rates are at historical console lows), leading us to suspect that many Wiis are relegated to the playroom or (heaven forbid) the closet," he added.

"It is possible that initial expectations for new customers from the Wii installed base may be overly optimistic, and we will closely monitor Netflix's subscriber growth over the next few quarters to see if the decline in growth is as significant as we have forecast."

Q1 financials for Netflix, reported on Wednesday, showed profits of $187 million and a subscriber base of 13.97 million.

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Kath Brice

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