Online DVD rental and retail site Netflix, Inc. Wednesday filed with the Securities and Exchange Commission (SEC) for an initial public offering (IPO) of its common stock
The Los Gatos, Calif.-based company is hoping to make $115 million by offering the securities. Merrill Lynch & Co., Thomas Weisel Partners LLC and U.S. Bancorp Piper Jaffray are acting as managers of the proposed offering.
Founded in 1998, Netflix is a subscription service that gives more than 500,000 subscribers access to its library of more than 11,500 movie, television and other filmed entertainment titles.
The company's standard subscription plan lets subscribers to have three titles out at the same time with no due dates, late fees or shipping charges for $19.95 per month.
Subscribers can view as many titles as they want in a month. Subscribers select titles at the Web site with the help of its CineMatch technology. The DVDs are sent by standard first-class mail and returned at the subscriber's convenience using prepaid mailers. Once a title has been returned, the company then mails the next available title in a subscriber's wish list.
The NetFlix store also includes a selection of DVD-specific movie reviews, recommendations, and articles to assist shoppers, as well as search and browse features.
Shoppers may also "reserve" DVD titles that have been announced, but not released, by clicking on the Rent option for the desired title and adding it to their Shopping Cart. Reserved movies are shipped to customers on the release date, or street date, which is determined by the movie studios.
It's not a bad market to be in considering the Consumer Electronics Manufacturers Association estimates more than 400,000 DVD video players have been sold since the format was launched in the spring of 1997.
The company has also been doing well in its revenues rising from $5 million in 1999 and a $75.9 million in last year. But in its first year, NetFlix posted an operations loss of $36.8 million of which $12.67 million was used for investing. In its second year the company's losses totaled $30 million.
The company also faces stiff competition from the likes of Hollywood Entertainment, which has 1,818 Hollywood Video retail superstores in the lower 48 states and Blockbuster Entertainment Inc., which has more than 7,700 stores in the United States and 25 other countries.
Netflix is betting that customers would rather order from home than wait in long lines.
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