Netflix comments on increased marketing spend (1Q05 conf call quotes)

Below are some comments from Netflix (ticker: NFLX) from its April 21, 2005 conference call with investors.

Netflix CEO Reed Hastings provided lower than expected guidance for
Q2 and the remainder of 2005 on his conference call, and the stock
plunged in response. Here's his justification for increasing Netflix'
spending on marketing and emphasising lower priced rental plans:

…I said competition was affecting our churn and
subscriber acquisition costs. Now I want to tell you what we're doing
about it. First, we're going to spend marketing dollars to replace the
churn subs. Second, we're going to increase marketing spending on a
per-subscriber basis…, and third, we're going to offer subscribers a
choice of plans at sign up… we expect a GAAP net loss of $2.2-$7.2
million due to increased marketing spending, and we expect the business
to return to profitability in Q3 and Q4 of this year.

…for how long will we be spending 17 to 20% of revenue on marketing?
Because that's very high for an e-retailer or a retailer generally.
Wal-mart, Best Buy, Amazon, Blockbuster, they're all at 1 to 3% of
revenue on marketing. And as our brand becomes more established, as we
settle into 20 and 30% secular growth rates, we should be able to make
considerable progress in terms of getting our percent of revenue on
marketing down... as that market stabilizes, we'll then see a return to
substantial profitability for both of the players that you typically
see in a large fast-growing long lasting two-firm market.

(Quotes are from the CCBN StreetEvents transcript.)