Netflix Finds Movie Rental Riches on Xbox Live

Netflix profits are exploding as consumers stay indoors and its partnership with Microsoft starts selling digital flicks.

After announcing that its 2008 fourth quarter profit had risen a stunning 45 percent, Netflix established itself as the leader in legal online movie rentals. Wedbush Morgan Securities analyst Michael Pachter contributes part of Netflix's growing dominance in this field to the distribution deal between the movie rental company and Microsoft for selling Netflix items over Xbox Live and directly into customers' televisions.

Xbox Live hosts eight million Gold members, all of whom are "a click of the mouse away from becoming Netflix subscribers," according to Pachter. He estimates that 800,000 Gold members were previous Netflix customers before the Xbox Live rental service started and another 200,000 signed up in 2008.

Pachter explained to GameDaily, "We think that subscriber growth will continue at super-normal levels for quite some time. We believe that the Xbox Live Gold membership is a proverbial gold mine of potential members, and expect to see as many as 1 million join as Netflix members in the next year," he said. "Beyond that, we note that Microsoft is still selling a large number of Xbox 360 units (we estimate that it will sell another 5 - 6 million in the U.S. in 2009), with conversion of around 35% of these owners to Xbox Live Gold membership."