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Online movie streaming Quickflix hit with $6.4 million loss

Australian movie DVD distributor and online streaming movie and TV access provider Quickflix (ASX: QFX) released its full-year report for 2013, showing a net loss of $6.42 million, which is actually better than last year’s $13.9 million loss in 2012.  Revenue increased from $16.65 milion to $19.06 million — up 14.5%.

Looking at the income statement, the biggest change that accounts for most of the improvement of earnings is a reduction of about $6 million for marketing expenses — down from $7.7 million to $1.7 million.

For service purchasing customers, the total number temporarily peaked in March 2012 at around 115,000, and according to the quarterly update for June 2013, the current number of customers purchasing services (subscription, pay to view or pay to own) stood at 106,825.

Subscriptions start at $14.99 per month, with more expensive ones that allow more streaming at one time, and viewers can choose from movies and TV shows, including premium TV shows such as from HBO in the US.

Since the company listing in 2005, it hasn’t turned a profit yet, although revenues have been increasing steadily since then. It is difficult to say when the big turn to profit will occur. The company operates only in Australia and New Zealand, so may not be as successful as the US Netflix, which started out the same way as a DVD distributor by mail, and then added online streaming as download speeds became fast enough to watch movies as they were being downloaded.

Domestic competition comes from Telstra’s (ASX: TLS) Bigpond Movies and JB Hi-Fi’s (ASX: JBH) JBNow for streaming movies, TV and music, so the challenge will be to attract new customers against those well-known rivals.

Quickflix is moving fast to be accessible on many different formats and devices. It announced that soon it will be launching new applications for both Sony PlayStation and Microsoft Xbox gaming consoles as it sees the potential from those console makers’ plans to turn their gaming experience into a complete media experience for homes.

Similarly, it is moving in the smartphone and smart TV arena, too, with plans to stream directly to LG smart TVs, and developing streaming for Freeview MHEG TVs in New Zealand.

No final dividend was declared.

Foolish takeaway

Only investing mavericks and highly knowledgeable people in this industry sector should be buying this stock. It still hasn’t established a solid earning history. It could be the next Netflix, but unless it could clearly make itself the market leader and turn over some great profit, it could go by the way of MySpace. Earnings are the foundation of returns and share price growth.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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