Netflix is more optimistic about future growth

Hastings: Company could hit $1 billion revenue mark by 2007.

By Laura Dunphy -- Video Business, 5/13/2003

MAY 13 | Netflix Inc. may reach its goal of $1 billion in annual revenue by as early as 2007, two years sooner than recently projected, CEO Reed Hastings told analysts Tuesday.

The company previously said the target date for accomplishing this was 2009, a timeline that Hastings reiterated as still possible during his presentation at a U.S. Bancorp Piper Jaffray technology conference.

But he noted, "We look at that as the conservative view."

An accompanying slideshow indicated that Netflix's compound annual growth rate is now 73%, the increase from $153 million at the end of 2002 to the $265 million projected for 2003. (The $265 million figure represents the midpoint of the guidance range for the year.)

Since companies' growth rates tend to slow as they get bigger, it's likely the rate will decrease during the next several years. Hitting $1 billion in 2009 represents a compound annual growth rate of 25%, Hastings explained. If the company's growth is slightly more aggressive at about 40%, he said, Netflix would hit $1 billion in 2007.

"That we'll be somewhere in that range is our guidance and expectation," Hastings said.

When the company hits its target depends on the growth of DVD overall, how the company manages growth, whether it is able to retain customers, and whether it can continue to fend off competitive online advances from traditional rental giant Blockbuster Inc. and retailer Wal-Mart Stores.

"We have a first mover advantage," Hastings said. "The barrier is not so much to entry but to successful profitability."

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