Netflix Inc (NFLX) 2002 Q4 法說會逐字稿

Good day, everyone. And welcome to today’s Netflix fourth quarter and year-end, fiscal 2002 results conference call. Today’s call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Chief Financial Officer for Netflix, Mr. Barry McCarthy. Please go ahead, sir.

今天是個好日子。歡迎參加今天的 Netflix 第四季度和年底 2002 財年業績電話會議。今天的通話正在錄音中。現在，關於開場白和介紹，我想把電話轉給 Netflix 的首席財務官 Barry McCarthy 先生。請繼續，先生。

Thank you, Sylvia. And welcome, everyone, to the 2002 Netflix fourth quarter earnings call. In a moment, I’ll turn the call over to Reed Hastings, the company’s founder and CEO. But, first I’ll dispense with the housekeeping details. We released our earnings for the fourth quarter and full year at 1:05 PM today, Pacific time. The earnings release and this conference call are available at the company’s investor relations web site at www.Netflix.com. A re-broadcast of this call will be available at the Netflix web site after 5:00 PM Pacific time, today.

謝謝你，西爾維亞。歡迎大家參加 2002 年 Netflix 第四季度收益電話會議。稍後，我會將電話轉給公司的創始人兼首席執行官里德黑斯廷斯。但是，首先我將免除內務管理細節。我們在太平洋時間今天下午 1:05 發布了第四季度和全年的收益。收益發布和本次電話會議可在公司的投資者關係網站 www.Netflix.com 上查閱。太平洋時間今天下午 5:00 後，Netflix 網站將重播此次電話會議。

Some of the information you will hear during this call, including our guidance regarding the company’s future performance, consists of forward-looking-statements. And these statements are subject to risks and uncertainties that could cause actual results to differ materially. For a detailed discussion of such risks and uncertainties, please review our filings with the Securities and Exchange Commission, including our prospectus file with the Commission on May 22, 2002. And now, over to Reed.

您將在本次電話會議中聽到的一些信息，包括我們對公司未來業績的指導，由前瞻性陳述組成。這些陳述受風險和不確定性的影響，可能導致實際結果大相徑庭。有關此類風險和不確定性的詳細討論，請查看我們提交給美國證券交易委員會的文件，包括我們於 2002 年 5 月 22 日提交給委員會的招股說明書文件。現在請輪到 Reed。

Thank you, Barry. We made great progress in Q4 towards our goal of 5 percent TV household penetration, a billion dollars in revenue and 100-200 million in annual free cash-flow. This quarter, we surpassed 3.8 percent TV household penetration in our first market, the greater San Francisco Bay area. And our penetration continues to climb steadily. A year ago, we started opening metropolitan shipping centers to provide more of our subscribers with free overnight delivery and our strategy is working. In the Sacramento area, as an example, where we opened our first metro shipping center, penetration has increased in Q4 from 1.7 to 2.2 percent of TV households. Boston, where we opened our second metro center, moved from 1.3 to 1.7 percent TV household penetration. Nationwide, our TV household penetration today is only .74 percent. So, we have plenty of open field running ahead, especially as we add more metro shipping centers.

謝謝你，巴里。我們在第四季度取得了很大進展，實現了 5% 的電視家庭普及率、10 億美元的收入和 100-2 億美元的年度自由現金流的目標。本季度，我們在第一個市場大舊金山灣區的電視家庭普及率超過了 3.8%。我們的滲透率繼續穩步攀升。一年前，我們開始開設大都市航運中心，為更多訂戶提供免費隔夜送貨服務，我們的戰略正在奏效。例如，在薩克拉門托地區，我們開設了第一個地鐵航運中心，電視家庭的普及率在第四季度從 1.7% 增加到 2.2%。我們開設第二個地鐵中心的波士頓的電視家庭普及率從 1.3% 上升到 1.7%。在全國范圍內，我們今天的電視家庭普及率僅為 0.74%。因此，我們前面有很多空地，尤其是當我們增加更多的地鐵航運中心時。

Fueling this growth are four fundamental trends. One, increase in consumer comfort with e-commerce. Two, continuing adoption of DVD. Three, consumers continued love of movies, with the box office enjoying an all-time record year in 2002. And fourth, the broad consumer appeal of subscription entertainment models.

推動這種增長的是四個基本趨勢。第一，提高消費者對電子商務的接受度。第二，繼續採用 DVD。第三，消費者繼續熱愛電影，2002 年票房創下歷史新高。第四，訂閱娛樂模式對消費者的廣泛吸引力。

The first trend, increasing consumer comfort with e-commerce, we believe, will be a steady, ten-year consumer trend, propelling the growth of category leading e-commerce companies like Amazon, Expedia, Yahoo and Netflix. The second trend, still early, is the steady growth of DVD households, which will fuel our growth for the next several years as DVD household penetration continues to climb from its current 40 percent to 90 percent plus. Five years from now, VHS will be a relic on par with 8-track tapes and vinyl records.

我們認為，第一個趨勢是提高消費者對電子商務的接受度，這將是一個穩定的、十年的消費趨勢，推動亞馬遜、Expedia、雅虎和 Netflix 等類別領先的電子商務公司的增長。第二個趨勢仍處於早期階段，即 DVD 家庭的穩步增長，隨著 DVD 家庭普及率從目前的 40% 繼續攀升至 90% 以上，這將推動我們未來幾年的增長。五年後，VHS 將成為與 8 軌磁帶和黑膠唱片相提並論的遺物。

With 44 million TV households already, DVD has become a mainstream consumer product with mass market adoption. And as DVD has mainstreamed, so has the Netflix subscriber rates, with women representing more than 50 percent of our subscribers today, up from 20 percent two years ago. College graduates representing 30 percent of our subscribers today, versus 70 percent two years ago. And with TV households income of roughly half of what it was two years ago.

DVD 已經成為擁有 4400 萬電視家庭的主流消費產品，並被大眾市場採用。隨著 DVD 成為主流，Netflix 的訂戶率也隨之提高，如今女性占我們訂戶的 50% 以上，高於兩年前的 20%。如今，大學畢業生占我們訂戶的 30%，而兩年前這一比例為 70%。電視家庭的收入大約是兩年前的一半。

The third trend propelling Netflix is consumers continued love affair with feature movies. There are many kinds of entertainment competing for our wallet and our time; including video games, sporting events, reality TV and Internet browsing. But, despite the increase in choices, consumers spent more at the box office in 2002 than ever before in history.

推動 Netflix 發展的第三個趨勢是消費者對故事片的持續喜愛。有很多種娛樂活動在爭奪我們的錢包和時間；包括視頻遊戲、體育賽事、真人秀和互聯網瀏覽。但是，儘管選擇增加了，但 2002 年消費者在票房上的花費比歷史上任何時候都多。

Finally, the fourth trend is the consumer preference for subscription-delivered entertainment. From the consumers' point of view, one monthly payment for unlimited enjoyment is a clear winner. HBO’s market, for example, generates over five times more revenue than the entire universe of Pay Per View; despite the fact that Pay Per View has newer movies. Historically, home video rental companies have employed a pay-as-you-rent model. We invented a better way, using the subscription model, and now, over 850,000 consumers have joined Netflix.

最後，第四個趨勢是消費者對訂閱式娛樂的偏好。從消費者的角度來看，每月支付無限享受是一個明顯的贏家。例如，HBO 的市場產生的收入是整個 Pay Per View 領域的五倍多；儘管按次付費有更新的電影。從歷史上看，家庭視頻租賃公司採用的是按需付費模式。我們發明了一種更好的方式，即使用訂閱模式，現在，超過 850,000 名消費者加入了 Netflix。

As we reach critical mass and leaving the growth of this new category of home entertainment, other companies have taken notice. As many of you probably know, this past quarter, Blockbuster expanded their store-based subscription tests, and our research confirms theirs – that their customers love subscriptions. While Blockbuster has yet to roll-out their program nationally, they show every intention of doing so. The battle for the new era – the era of subscription entertainment, will shortly begin in earnest. The online subscription has major advantages over store-based subscriptions; including free home delivery, no return trip, enormous selection, and a web site filled with independent reviews and personal recommendations. In addition, the lean cost structure of Netflix allows us to offer lower prices to consumers, offer more movies out at a time, and still have a high margin business. We are confident that when Blockbuster rolls-out their store-based subscription model that we will continue to prosper.

當我們達到臨界質量並離開這種新的家庭娛樂類別的增長時，其他公司已經註意到了。你們中的許多人可能都知道，在上個季度，Blockbuster 擴大了他們基於商店的訂閱測試，我們的研究證實了他們的測試——他們的客戶喜歡訂閱。雖然 Blockbuster 尚未在全國推出他們的計劃，但他們表現出了這樣做的全部意圖。新時代——訂閱娛樂時代的爭奪戰，即將打響。與基於商店的訂閱相比，在線訂閱具有主要優勢；包括免費送貨上門、無需回程、海量選擇，以及充滿獨立評論和個人推薦的網站。此外，Netflix 的精益成本結構使我們能夠向消費者提供更低的價格，一次提供更多的電影，並且仍然擁有高利潤率的業務。我們相信，當 Blockbuster 推出基於商店的訂閱模式時，我們將繼續繁榮發展。

As far as direct competition in the online space, we haven’t felt it. With our extensive network and metropolitan shipping centers, we can provide free overnight delivery to over 50 percent of our subscribers and two-day delivery to the balance. Our online competition, which shows no signs of opening their own metropolitan shipping centers, is a clearly inferior consumer choice. Because they inconvenience consumers with three to five day shipping, each way, versus our one to two day. Given our growing momentum, our intense focus, and the competition’s lack of investment to date, we are confident of maintaining 90 plus percent market share of the online market this year.

至於在線空間的直接競爭，我們還沒有感受到。憑藉我們廣泛的網絡和大都市航運中心，我們可以為超過 50% 的訂戶提供免費的隔夜送貨服務，並為其餘的用戶提供兩天送達服務。我們的在線競爭沒有開設自己的大都市航運中心的跡象，顯然是一個劣等的消費者選擇。因為他們給消費者帶來了三到五天的單程運輸，而不是我們的一到兩天。鑑於我們不斷增長的勢頭、我們的高度關注以及迄今為止競爭對手缺乏投資，我們有信心在今年保持在線市場 90% 以上的市場份額。

Our execution in Q4 was excellent, but not flawless. On the positive side, we increased inventory availability. We increased customer satisfaction. We decreased churn. We maintained our gross margins. We maintained our subscriber acquisition cost. We generated $4.5 million of additional free cash-flow. We met the improved financial guidance we gave you during the quarter. And, we smashed through the goals we set for ourselves in February, 2002, one year ago, when we started down the path of taking the company public. Our one flaw was my promising to you, despite my long history in managing large software system development projects, that we would launch our new version of the [Cinemat’s] [ph] recommendation system in Q4. We did not. But, we do expect to launch it in the first half of this year.

我們在第四季度的執行非常出色，但並非完美無缺。從積極的方面來看，我們增加了庫存可用性。我們提高了客戶滿意度。我們減少了客戶流失。我們維持了毛利率。我們保持了訂戶獲取成本。我們產生了 450 萬美元的額外自由現金流。我們在本季度滿足了我們為您提供的改進後的財務指導。而且，我們實現了一年前 2002 年 2 月為自己設定的目標，當時我們開始走上公司上市的道路。我們的一個缺陷是我向您承諾，儘管我在管理大型軟件系統開發項目方面有著悠久的歷史，但我們將在第四季度推出新版本的 [Cinemat's] [ph] 推薦系統。我們沒有。但是，我們確實希望在今年上半年推出它。

To conclude, our goal is 5 percent TV household penetration nationwide. While we’re only up to 3.8 percent in the greater Bay area as a whole, we have already hit the 5 percent of TV household mark in numerous Bay area cities; including Sunnyvale, Los Gatos, Saratoga, Santa Cruz, Palo Alto, and most impressively, our first major American city that has 5 percent of its TV households subscribing to Netflix; San Francisco.

總而言之，我們的目標是全國電視家庭普及率達到 5%。雖然我們在整個大灣區只有 3.8%，但我們已經在許多灣區城市達到了 5% 的電視家庭目標；包括桑尼維爾、洛斯加托斯、薩拉託加、聖克魯斯、帕洛阿爾托，以及最令人印象深刻的美國第一個擁有 5% 的電視家庭訂閱 Netflix 的主要城市；舊金山。

As those of you on the last call know, we end this call thanking the subscribers in the town with the highest DVD household penetration in America. Last quarter, that was Rancho Santa Fe, down near San Diego, where 20 percent of the TV households subscribe to Netflix. Our winner this quarter, coming in at 26 percent of TV households subscribing is again, Rancho Santa Fe. Thank you, Rancho Santa Fe, for leading the way. With that, open it up for questions.

正如上次電話會議中的那些人所知，我們結束本次電話會議要感謝美國 DVD 家庭普及率最高的城鎮的訂戶。上個季度是聖地亞哥附近的聖達菲牧場，那裡 20% 的電視家庭訂閱了 Netflix。本季度我們的贏家再次成為 Rancho Santa Fe，以 26% 的電視家庭訂閱。謝謝您，Rancho Santa Fe，帶路。有了這個，打開它來提問。

With that, Barry McCarthy will first do the financial overview.

有了這個，巴里麥卡錫將首先做財務概覽。

Thank you, Reed. And then we’ll open it for questions. Fiscal 2002 has been a remarkable year for Netflix. We’ve substantially grown the market and our leadership position in the online DVD rental – while posting strong financial performance. The summary key financial metrics for the fourth quarter include total revenue of $45.2 million, gross margin of 48.2 percent, net loss on a GAAP basis of $2.3 million, pro forma net income before non-cash stock-based compensation expense of $463,000, and EBITDA of $8.1 million, and positive cash-flow of $4.7 million.

謝謝你，里德。然後我們將打開它提問。 2002 財年對 Netflix 來說是不平凡的一年。我們大幅擴大了在線 DVD 租賃市場並鞏固了我們的領導地位，同時公佈了強勁的財務業績。第四季度的主要財務指標摘要包括總收入 4520 萬美元、毛利率 48.2%、按 GAAP 計算的淨虧損 230 萬美元、扣除非現金股票補償費用前的備考淨收入 463,000 美元以及 EBITDA 810 萬美元，正現金流為 470 萬美元。

Total revenues for the quarter grew 109 percent year-over-year and 11 percent sequentially, paced by growth in paying subscribers, and an ASP of $19.94, unchanged from the prior quarter. For the full year, 2002, revenues doubled to reach $152.8 million, up from 75.9 million in 2001. We acquired 315,000 new trial subscribers during the fourth quarter, a 14 percent increase, versus the third quarter. Our expectation for subscriber acquisition cost was $34-38 per acquired sub. We spent $33.31 per new trial subscriber, 7 percent better than the midpoint of our guidance and a 1 percent improvement from the third quarter. Gross margin for the quarter was 48.2 percent; slightly above our guidance of 47-48 percent, and up from 47.2 in the third quarter of 2002. Disc usage per paid subscriber declined 3 percent during the quarter. Cost savings from lowered postage and packaging expense were reinvested in DVD inventory as part of our strategy to continuously improve the quality of the subscription experience at Netflix.

本季度總收入同比增長 109%，環比增長 11%，這得益於付費用戶的增長，平均售價為 19.94 美元，與上一季度持平。 2002 年全年收入翻了一番，達到 1.528 億美元，高於 2001 年的 7590 萬美元。我們在第四季度獲得了 315,000 名新試用用戶，比第三季度增長了 14%。我們對訂閱者獲取成本的預期是每個訂閱者 34-38 美元。我們為每個新試用用戶花費了 33.31 美元，比我們指導的中點高出 7%，比第三季度提高了 1%。本季度毛利率為 48.2%；略高於我們 47-48% 的指導值，高於 2002 年第三季度的 47.2%。本季度每位付費用戶的光盤使用率下降了 3%。通過降低郵費和包裝費用節省的成本被重新投資於 DVD 庫存，作為我們不斷提高 Netflix 訂閱體驗質量戰略的一部分。

Average monthly churn for the quarter declined to 6.3 percent, from 7.2 percent in the prior quarter and 6.2 percent in the prior year. Churn rates were better than expected throughout the quarter for free trial and paying subscribers. Among paying subscribers, lower churn rates occurred broadly across the entire subscriber base. Reed has already talked to you about our ongoing efforts to relentlessly improve the Netflix user experience, including our investments in additional hubs. In addition to faster DVD delivery, we continued to invest heavily in new DVD inventory, consisting primarily of back catalogue content. We believe our cumulative investment of $14.4 million during the last two quarters contributed to improvement in churn in the recent quarter.

本季度平均月度流失率從上一季度的 7.2% 和去年同期的 6.2% 下降至 6.3%。整個季度免費試用和付費用戶的流失率都好於預期。在付費用戶中，較低的流失率普遍出現在整個用戶群中。里德已經向您介紹了我們為不斷改善 Netflix 用戶體驗所做的持續努力，包括我們對更多中心的投資。除了加快 DVD 交付速度外，我們還繼續大量投資於新的 DVD 庫存，主要包括過往目錄內容。我們相信，我們在過去兩個季度累計投資 1,440 萬美元有助於改善最近一個季度的客戶流失率。

For the fifth consecutive quarter, free cash flow was positive, generating $4.7m in the fourth quarter, compared to $5.8m in the third quarter of 2002. For the full year, we generated $15.8m in positive cash flow. As expected, free cash flow declined, in line with our expectations as we began to pay for recent inventory purchases in this quarter. Total cash and cash equivalents, including short-term investments at the end of the quarter was $104m. Less outstanding debt of $1.7m, this equates to $4.59 per fully diluted share of cash.

自由現金流連續第五個季度為正，第四季度產生 470 萬美元，而 2002 年第三季度為 580 萬美元。全年，我們產生了 1580 萬美元的正現金流。正如預期的那樣，自由現金流下降，符合我們的預期，因為我們在本季度開始為最近的庫存購買付款。本季度末包括短期投資在內的現金和現金等價物總額為 1.04 億美元。減去 170 萬美元的未償還債務，這相當於每股完全攤薄現金 4.59 美元。

I believe that we’re well capitalized to take advantage of the opportunities that lay before us. Our earnings release includes guidance from the first quarter of the year – for the first quarter and the year ending December 31, 2003. In summary, we expect to finish the year with revenue of between $235m and $255m, to reach pro forma net income on a sustained basis, in the second quarter of 2003, and to continue to generate positive free cash flow quarterly.

我相信我們有足夠的資本來利用擺在我們面前的機會。我們的收益發布包括今年第一季度的指導——第一季度和截至 2003 年 12 月 31 日的年度。總而言之，我們預計今年年底的收入將在 2.35 億美元至 2.55 億美元之間，達到預估淨收入2003 年第二季度持續增加收入，並繼續在每個季度產生正的自由現金流。

This concludes my remarks on financial results and now we’ll open the phone to questions.

我對財務結果的評論到此結束，現在我們將打開電話提問。

Thank you, Mr. McCarthy. (Caller instructions)

謝謝你，麥卡錫先生。 （來電說明）

And we’ll take our first question from Dennis McAlpine from McAlpine & Associates. Please state your question.

我們將從 McAlpine & Associates 的 Dennis McAlpine 提出我們的第一個問題。請說出你的問題。

Thank you. A couple questions if I may. You mentioned and the number would indicate that you are buying more DVD’s. Does this mean that you’re buying them, as opposed to doing revenue sharing and where do you see that evening out as the quarters go on?

謝謝。如果可以，請問幾個問題。你提到了，這個數字表明你正在購買更多的 DVD。這是否意味著你正在購買它們，而不是進行收益分享，隨著季度的進行，你會在哪裡看到那個晚上？

Dennis, Barry. We continue to purchase heavily under rev share agreements. We have rev share agreements with over 50 studios, as we discussed in the last call. As we grow our subscriber base rapidly, to the extent we feel inventory pressure, typically we feel it in back catalog disks, with back catalog being defined as disks with a street date of more than 13 weeks hold. And so, we have been buying deeply in back catalog, both in anticipation of the growth that we would see during the fourth quarter of ’02 and the first quarter of ’03. Which historically have been rapid periods of relative growth for us and also to enhance subscriber experience.

丹尼斯，巴里。我們繼續根據收益分成協議大量採購。正如我們在上次電話會議中討論的那樣，我們與 50 多家工作室簽訂了收入分成協議。隨著我們的訂戶群迅速增長，我們感受到庫存壓力的程度通常是在備份目錄磁盤中，備份目錄被定義為街道日期超過 13 週的磁盤。因此，我們一直在大量購買庫存產品，以期我們將在 02 年第四季度和 03 年第一季度看到增長。從歷史上看，這對我們來說是相對快速增長的時期，也是為了增強用戶體驗。

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So, we can continue to buy on both fronts, through rev share and direct purchase.

因此，我們可以通過收益份額和直接購買繼續在兩個方面進行購買。

It would also seem that you’re adding your distribution centers at a fairly rapid rate. Can you tell us how many of those you ended up adding in the fourth quarter and what you expect on a quarterly basis going forward? And also, can we assume that, as you add these new distribution centers, that those are areas where you were building up subscribers the most rapidly?

您似乎也在以相當快的速度添加配送中心。你能告訴我們你在第四季度最終增加了多少人，以及你對未來每個季度的期望嗎？而且，我們是否可以假設，當您添加這些新的配送中心時，這些是您建立訂戶最快的區域？

Dennis, its Reed here. We opened Stanford, Connecticut and Dallas/Fort Worth, so two in Q4. We’ll be opening one or two per month over the year. We put them in areas, certainly, where there are a lot of subscribers, but also areas where there are a lot of potential subscribers. So, it’s a mix of those factors that go into the ordering of our system.

丹尼斯，這裡是里德。我們在第四季度開設了斯坦福、康涅狄格和達拉斯/沃思堡，所以有兩個。我們將在一年中每月開設一兩個。當然，我們將它們放在有很多訂閱者的區域，但也有很多潛在訂閱者的區域。因此，它是影響我們系統排序的這些因素的混合體。

Thank you.

謝謝。

Thank you, Dennis.

謝謝你，丹尼斯。

And our next question comes from Gordon Hodge of Thomas Weisel Partners.

我們的下一個問題來自 Thomas Weisel Partners 的 Gordon Hodge。

Hi, this is Sherry [Lynn][ph] with --- speaking for Gordon Hodge. Great quarter. I just had a couple questions. First, we noticed that the [SAC] cost came in under guidance. Could you talk about the components of marketing spend?

大家好，我是 Sherry [Lynn][ph]，代表 Gordon Hodge 發言。偉大的季度。我只是有幾個問題。首先，我們注意到 [SAC] 成本受到指導。您能談談營銷支出的組成部分嗎？

Yeah, the components were consistent with prior quarters. We had been guiding to $40, anticipating competition. As it turned out, the online competition didn’t materialize, thus allowing us to stay at the $33 to $34 range, where we were in Q2 last year and Q3 last year and now in Q4, so it’s entirely consistent. Our larger sources are online, as they have been, that is, pop ups and banners and such. Second largest is word of mouth.

是的，這些組件與前幾個季度一致。我們一直在指導 40 美元，期待競爭。事實證明，在線競爭並沒有實現，因此我們可以保持在 33 美元到 34 美元的範圍內，去年第二季度和去年第三季度以及現在的第四季度，所以它是完全一致的。我們更大的來源是在線的，就像它們一樣，即彈出窗口和橫幅等。第二大是口耳相傳。

Okay. Is it roughly still a third, a third, a third, or has online becoming - has that been cut - excuse me, becoming more dominant?

好的。它仍然大約是三分之一、三分之一、三分之一，還是在線變得 - 已經被削減 - 對不起，變得更占主導地位？

Sherry, its Barry. The subscriber acquisition mix in the fourth quarter was substantially the same as the third quarter. So it’s been very steady.

雪利酒，它的巴里。第四季度的用戶獲取組合與第三季度基本相同。所以一直很穩。

Okay.

好的。

With a combination of online and word of mouth accounting for slightly in excess of 70% of acquired subscribers.

在線和口耳相傳的組合佔獲得的訂戶的 70% 以上。

Okay, great and just a follow up question to the distribution center question that the previous person posed. Just wondering if you could talk about how the rollout might have been effecting churn or new customer acquisitions?

好的，很好，只是對前一個人提出的配送中心問題的後續問題。只是想知道您是否可以談談推出可能如何影響客戶流失或新客戶收購？

Sure. We continue to invest in the centers because they provide the free overnight delivery to the customers and that does improve the churn and it improves customer satisfaction and proves word of mouth signups. But how much it improves varies quite a bit by community, as they get used to varieties and local post office and so, it’s one of the factors that led to the improved churn that we’ve seen.

當然。我們繼續投資於這些中心，因為它們為客戶提供免費的隔夜送貨服務，這確實提高了客戶流失率，提高了客戶滿意度並證明了口碑註冊。但它的改善程度因社區而異，因為他們習慣了品種和當地郵局，因此，這是導致我們所看到的流失率改善的因素之一。

Uh-huh.

嗯。

But, I mean, we also had distribution centers, not quite as many, but almost as many in Q3, so it’s not the dominant factor that’s going on. One of the things that happens with the improvement in the churn is we get a lot of subscribers the last two weeks of the year, because of the Christmas rush. So, when there’s a surge at the back end, those customers are in their trial period and they don’t have a chance to churn off and so that gives us a little bit of a seasonality drop in the Q4 churn.

但是，我的意思是，我們也有配送中心，數量不多，但在第三季度幾乎一樣多，所以這不是主導因素。隨著流失率的提高，其中一個原因是我們在一年的最後兩週獲得了大量訂閱者，因為聖誕節高峰期。因此，當後端出現激增時，這些客戶正處於試用期，他們沒有機會流失，因此這給我們帶來了第四季度流失的季節性下降。

Right, yeah. Uh-huh. Yeah, that makes sense. So, you would expect churn to possibly go up a little, first quarter, just based on seasonal events?

對，是的。嗯。是的，這是有道理的。那麼，您是否預計第一季度的流失率可能會略有上升，僅僅是基於季節性事件？

Sherry, we’re going to withhold our guidance on churn. If, for some reason, we see estimates in the market place that seem inconsistent with our expectations, we may come off the bench and assist you in finding the range we’re more comfortable with.

雪莉，我們將保留對客戶流失的指導。如果出於某種原因，我們看到市場上的估計似乎與我們的預期不一致，我們可能會替補出場並幫助您找到我們更滿意的範圍。

Okay.

好的。

I want to supplement Reed’s answer, with respect to hub growth. If you look back at our release on January 2nd and in particular you look at the household penetration data for the Bay Area and rest of the country, where we have been launchings hubs, and compare the year over year penetration grades, I think that you will find that the rest of the country is now, for the first time, growing faster. And the Bay Area is growing.

關於樞紐增長，我想補充里德的回答。如果您回顧一下我們在 1 月 2 日發布的新聞稿，尤其是您查看灣區和美國其他地區的家庭普及率數據，我們一直在這些地區推出中心，並比較同比普及率等級，我認為您你會發現這個國家的其他地區現在第一次增長得更快。灣區正在發展。

That’s great. That’s interesting.

那太棒了。那很有意思。

And Sherry, your instincts last year?

雪莉，你去年的直覺？

Uh-huh.

嗯。

Churn moved up one point between Q4 and Q1.

流失率在第 4 季度和第 1 季度之間上升了一個百分點。

Okay, great.

好的，太好了。

So that should be the historical.

所以這應該是歷史。

And I know that you probably haven’t done this historically, but do you break out churns of subscribers between paying and non-paying?

而且我知道您以前可能沒有這樣做過，但是您是否在付費和非付費之間打破了訂閱者的流失？

We have done it, historically, in this context. If you were a non-paying subscriber, you were in your free trial period.

從歷史上看，我們是在這種情況下這樣做的。如果您是非付費訂閱者，那麼您正處於免費試用期。

Uh-huh.

嗯。

And we have said that between 8 and 9 out of every 10 subscribers who take a free trial become a paying subscriber. Which is to say if 8 out 10 became – if 9 out of 10 became paying subscribers, then 1 out of 10 don’t.

我們說過，每 10 個免費試用的訂閱者中就有 8 到 9 個成為付費訂閱者。也就是說，如果 10 人中有 8 人成為——如果 10 人中有 9 人成為付費用戶，那麼 10 人中就有 1 人不會。

Okay.

好的。

Which to say that, in that first trial period, churn is 10%.

也就是說，在第一個試用期，客戶流失率為 10%。

Okay.

好的。

So churn roughly falls by half - a quick rule of thumb - every 6 months, at the 6-month mark and again at the 12-month mark.

因此，流失率大約每 6 個月下降一半——這是一個快速的經驗法則——在 6 個月大關和 12 個月大關時再次下降。

So, if you were to turn that around and say of the churned subscribers, how many of them are paid and how many of them are new, what would that be?

所以，如果你反過來說流失的訂閱者，其中有多少是付費的，有多少是新的，那會是什麼？

That we don’t break out.

我們不會爆發。

Okay. Okay great, thank you so much.

好的。好的，太好了，非常感謝。

Thank you, Sherry.

謝謝你，雪莉。

And once again, if you would like to ask a question, please press star-1. We’ll take the next question from Safa Rashtchy of Piper Jaffray.

再一次，如果您想提問，請按星號 1。我們將從 Piper Jaffray 的 Safa Rashtchy 那裡回答下一個問題。

Hey guys, actually Jason [Klug][ph] in for Safa. How are you? Congratulations on a great quarter. Wondering if you could talk a little bit about disk usage per average paid sub decreasing 3% quarter over quarter, it seems, going into quarter Q4, a colder quarter, seasonally, that disk usage should go up? Any reasons behind that?

大家好，實際上 Jason [Klug][ph] 代表 Safa。你好嗎？祝賀一個偉大的季度。想知道您是否可以談談每個平均付費訂閱者的磁盤使用量環比下降 3%，似乎進入第 4 季度，一個較冷的季度，季節性，磁盤使用量應該上升？這背後有什麼原因嗎？

And then secondly, could you talk a little bit about markets where you have - where subscriber services by either Blockbuster or via these services are up and running? And what you’re seeing, in terms of subscriber user rates or signup rates to NetFlix relative to markets for those two services are involved? Thanks.

其次，您能否談談您所擁有的市場——Blockbuster 或通過這些服務提供的訂戶服務已經啟動並運行的市場？你看到了什麼，就 Netflix 的訂戶用戶率或註冊率而言，相對於這兩項服務所涉及的市場？謝謝。

This is Barry. I’ll do the usage and let Reed cover the competition VOD piece. Average usage does bounce around seasonally some. It was seasonally up in the last quarter. It seems to have come seasonally down. It moves in a narrow range. I wouldn’t read too much into it when it moves up 3% or when it comes down 3%.

這是巴里。我會做用法，讓 Reed 來報導比賽 VOD 片段。平均使用量確實會季節性地反彈一些。它在上個季度出現季節性上漲。它似乎已經季節性下降。它在一個狹窄的範圍內移動。當它上漲 3% 或下跌 3% 時，我不會過多地解讀它。

I think it’s fair to represent to you that average usage has been consistent over time across the subscriber base, so we see no discernable trend up or down. There has been a slight increase, due to the faster delivery of disks and the ability of our subscriber base to view more disks during the monthly subscription period, but no significant shifts.

我認為可以公平地向您表示，隨著時間的推移，整個訂戶群的平均使用量一直保持一致，因此我們看不到明顯的上升或下降趨勢。由於磁盤交付速度加快以及我們的訂戶群能夠在每月訂閱期間查看更多磁盤，因此略有增加，但沒有顯著變化。

Great.

偉大的。

It’s Reed here. You asked about sign up rates in Blockbuster test cities and indeed, we monitor that closely, down to the neighborhood level, and we’ve seen no change across the Blockbuster test cities. Second, you asked about VOD. In particular, New York has a recent rollout in the last year of the Time Warner VOD system and also, we have seen no change in our sign up rates and in our retention in New York City. The fundamental issue is VOD is still a very small market and we’re relatively under-penetrated and it’s a $30b market for feature movies. It’s going to be 10 years before we start to see each other in any material way.

這裡是蘆葦。您詢問了 Blockbuster 測試城市的註冊率，事實上，我們密切監控，一直到社區級別，我們沒有看到 Blockbuster 測試城市的變化。其次，您詢問了 VOD。特別是，紐約在去年推出了時代華納 VOD 系統，而且我們在紐約市的註冊率和保留率也沒有變化。根本問題是 VOD 仍然是一個非常小的市場，我們的滲透率相對較低，這是一個價值 30b 美元的故事片市場。 10 年後，我們才開始以任何實質性的方式見面。

Great, thanks.

十分感謝。

And we’ll take a followup from Dennis McAlpine.

我們將從 Dennis McAlpine 跟進。

To go back to the prior question, would you talk about the absolute number in DVD’s per month? I think you said, a couple calls ago, there was an average of about 5 DVD’s per subscriber per month, if that is still holding? And then too, given the number of subscribers that you’re getting, new subscribers, why wouldn’t the subscriber acquisition cost or the cost – I’m sorry, the acquisition cost per average subscriber, why wouldn’t that be going down? I gather what you’re saying is there’s no economies of scale there.

回到前面的問題，你能談談每月 DVD 的絕對數量嗎？我想你說過，幾個電話前，每個訂戶平均每月約有 5 張 DVD，如果仍然如此？然後，考慮到您獲得的訂戶數量，新訂戶，為什麼訂戶獲取成本或成本 - 對不起，每個平均訂戶的獲取成本，為什麼不下降？我知道你的意思是那裡沒有規模經濟。

I don’t remember saying there’s no economies of scale, but as to the usage, you’re right, Dennis, that it stayed around 5 movies. That’s been consistent over the last couple of years and that’s why the gross margin has been so consistent over the past several quarters. It’s really been six quarters that we’ve been that dead on the gross margin target. As far as you --

我不記得說過沒有規模經濟，但至於使用，你是對的，丹尼斯，它停留在 5 部電影左右。這在過去幾年一直保持一致，這就是為什麼毛利率在過去幾個季度如此穩定的原因。確實有六個季度我們一直沒有實現毛利率目標。至於你——

Dennis, this is Barry. I want to chime in on the [SAC] cost, if I might. We did, for a period of time in ’99 and 2000, ride a very steep cost reduction curve, associated with the acquisition of subscribers, point one. Point two is that a very large percentage of our subscriber acquisition costs are acquired under variable cost programs. So, in the absence of growth there is no marketing expense, but to the extent we add a subscriber, we incur a cost associated with that acquisition. It insulates us against the risks associated with fixed spending.

丹尼斯，這是巴里。如果可以的話，我想談談 [SAC] 的成本。在 99 年和 2000 年的一段時間裡，我們確實經歷了一條非常陡峭的成本削減曲線，這與獲取訂戶有關，第一點。第二點是，我們很大一部分訂戶獲取成本是在可變成本計劃下獲得的。因此，在沒有增長的情況下，沒有營銷費用，但在我們增加訂戶的範圍內，我們會產生與該收購相關的成本。它使我們免受與固定支出相關的風險。

And the flip side of that equation is that there aren’t great scale economies to be ridden, except to the extent that the market becomes more broadly penetrated and the cost of reaching DVD owners drops in a significant way, because the size of the market has increased.

而這個等式的另一面是，除了市場變得更廣泛滲透並且接觸 DVD 所有者的成本顯著下降之外，沒有巨大的規模經濟可以駕馭，因為市場規模增加了。

Thank you.

謝謝。

And as a final reminder, please press star-1 to ask a question. We’ll go next to Eric [Brudos] [ph] of West Coast Capital Management.

最後提醒一下，請按 star-1 提問。接下來是西海岸資本管理公司的 Eric [Brudos] [ph]。

Hi, nice quarter. Can you talk a little bit about, on a pro forma basis, what kind of leverage gets the operating margin to, if you hit the $245m to $255m revenue in ’03?

嗨，不錯的季度。如果您在 03 年的收入達到 2.45 億美元至 2.55 億美元，您能否在備考基礎上談談什麼樣的槓桿作用可以使營業利潤率達到？

Beyond the guidance that we’ve given?

除了我們給出的指導之外？

I’m sorry, maybe I didn’t hear the –

對不起，也許我沒有聽到——

I think the question is what kind of operating leverage do we have if we hit the $235m number?

我認為問題是如果我們達到 2.35 億美元的數字，我們有什麼樣的經營槓桿？

Right.

正確的。

Or if we exceed the $235m number?

或者如果我們超過 2.35 億美元？

If you hit the $235m number. Maybe I just didn’t hear that guidance.

如果你達到 2.35 億美元的數字。也許我只是沒有聽到那個指導。

Well, we gave guidance in our release for pro forma operating loss, before a stock-based comp expense of $500,000 to $2.5m and EBITDA of $5.7m to $7.2m.

好吧，我們在發布的備考營業虧損中給出了指導，之前基於股票的補償費用為 500,000 美元至 250 萬美元，EBITDA 為 570 萬美元至 720 萬美元。

Okay. And then, can you talk a little bit about shrinkage, what it was in the quarter and kind of what you’re looking for during ‘03?

好的。然後，你能談談收縮率嗎，這個季度是什麼以及你在 03 年尋找的是什麼？

Eric, by shrinkage, do you mean of the DVD’s?

埃里克，你說的收縮是指 DVD 嗎？

Yes.

是的。

Like retail style theft?

喜歡零售風格的盜竊？

Breakage and non-returns, yeah.

破損和不退貨，是的。

Gotcha. It’s pretty consistent with all the past trends. You know it can run anywhere, it depends somewhat on the disk. We have at time had 2% per turn, but it varies somewhat by quarter. It’s been on, I guess, a slight declining trend, but not really materially. It’s a mix of, after a disk has been used many times, it gets somewhat brittle. That’s on the breakage side. Then on the loss side, is a small tax of either postal theft or just lost in the post office.

知道了。這與過去的所有趨勢都非常一致。您知道它可以在任何地方運行，這在某種程度上取決於磁盤。我們當時每回合有 2%，但每個季度有所不同。我猜它一直處於輕微下降的趨勢，但並不是真正的下降。它是混合的，在多次使用磁盤後，它會變得有些脆弱。那是在破損方面。然後在損失方面，是郵政盜竊或在郵局丟失的小稅。

Okay great, thanks.

好的，太好了，謝謝。

And that concludes our question and answer session. I’ll turn the conference back over to our host for any additional or closing remarks.

我們的問答環節到此結束。我會將會議轉回給我們的主持人，以獲得任何補充或結束語。

Thank you all for joining us on this call and we look forward to speaking with you again in the quarter.

感謝大家加入我們的電話會議，我們期待在本季度再次與您交談。

And that concludes today’s conference call. Thank you, everyone, for your participation.

今天的電話會議到此結束。謝謝大家的參與。