Netflix is riding the wave of Web video and video-on-demand popularity with financial results that are, well, over the top.  In Q1 2010 financial results announced yesterday, the subscription video-on-demand provider enjoyed growth that exceeded its own projections while seeing subscriber acquisition costs (SAC) plummet.

It costs Netflix only $21.54 for every new subscriber.  Compare that to historical customer acquisition costs for ISPs and broadband-access providers, which was as high as $150 to $200 per customer in recent years.  The convergence of the Web and entertainment services can clearly have a dramatic impact on not only costs, but lifetime customer value and overall market penetration.  Customer churn is at a record low for Netflix, coming in at only 3.8 percent in Q1.

An analysis by consulting firm Broadband Directions looked back at five years of Q1 results for Netflix to illustrate continuing trends in a positive direction.

Netflix ended the first quarter of 2010 with approximately 13,967,000 total subscribers, representing 35 percent year-over-year growth compared to the first quarter of 2009 and a 14 percent sequential growth over the fourth quarter of 2009.  Revenue followed, with Netflix banking $493.7 million in the first quarter of 2010,  a 25 percent year-over-year growth rate.

Half a billion dollars in revenue for one video-on-demand provider in three short months is a powerful proof statement for the popularity and profit potential in Internet TV and VOD.

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