U.S. Markets open in 1 hr 18 mins

The gift of a TV binge? Netflix gift cards a surprise hot holiday item

Michael Santoli
Michael Santoli

Giving someone a plastic gift card for a digital streaming-video service might seem as odd as sending a virtual fruitcake.

Yet Netflix gift cards, available for the first time in recent months, have emerged as a hot holiday item, with spot shortages striking the handful of retail stores Netflix Inc. (NFLX) is using to distribute them.

In Manhattan, the cards seem to have been sold out for the past several days at Staples Inc. (SPLS) and GameStop Corp. (GME) locations, the only chains in the borough that carried them.

When asked about the Netflix cards Monday, a saleswoman at a GameStop in downtown Manhattan asked, “What is it with this epidemic?”

The woman, who declined to give her name because she wasn’t authorized to speak on behalf of the company, said a customer had bought “about 30” in the previous week, leaving the shop with just a few remaining. Since then, she said, “we’ve had like eight million calls” from people seeking the cards.

(For what it’s worth, you can still find plenty of Hulu gift cards on the shelves.)

A Netflix spokesman said in an email, “We haven’t advertised them widely but note they've been widely seen on talk shows.” Specifically, they have been given away regularly on “The Ellen DeGeneres Show,” including on its recent “12 Days of Giveaways” series that concluded on Friday.

The spokesman added that the company had a “relatively limited inventory because we’re only in select retailers.” While he says “supply has been pretty OK,” there should be more cards flowing into stores this week and next.

Kroger Co. (KR), the big supermarket chain, is among the initial set of partners. A Kroger spokesman said the Netflix cards "are having a good holiday season for a new card."

Netflix is preparing to add more retail partners in the spring. The gift cards, which were first made available several months ago, come in $30 and $60 denominations and can be used to pay for Netflix subscriptions, which start at $7.99 per month. Customers can check Netflix's Web site for nearby stores that carry the cards.

Of course, Netflix is a fully digital service, allowing easy online sign-up and payment, offering subscribers access to an all-you-can-eat trove of original and already-released TV shows and movies.

Yet as with most gift cards, the appeal of giving them as a present is to have something to open. Emailing a friend or relative to let them know you’d like to cover a few months of their “House of Cards” habit seems a bit too unsentimentally transactional for the season.

Then again, their ease has made gift cards standard in the holiday gift exchange. According to the National Retail Federation, the average person buying gift cards this season will spend $172.74, up from $163.16 last year, with total spending expected to reach $31.74 billion.

Anecdotally, it seems plenty of younger (and not so young) people see the gift card as a clever way to persuade a skeptical or tech-averse parent to try the service.

Another appeal of the cards: They can easily be used to pay for the service by people who lack a credit card to place on file with Netflix.

A scan of social media sites shows a fair amount of interest in the gift cards, with plenty of folks claiming to have pleaded for the company to issue them in past years.

This apparent spurt of excitement about the prospect of giving the gift of Netflix comes as the company has struggled with slowing subscriber growth in the U.S. and as cable networks hustle to offer their own streaming services outside the pay TV “bundle.”

In October, Netflix reported that it had added 980,000 new domestic streaming customers in the third quarter, to just above 37 million. Forecasts had been for some 1.3 million new U.S. users, with some of the shortfall attributed to recent price increases for some customers. Netflix shares fell 19% the day it unvelied those results, and the stock has slid further since, losing more than 10% year to date in an otherwise strong market.

The majority of Netflix’s subscriber growth is now expected to come from overseas, where the company has rolled out the service country by country. For the current quarter, the company is anticipating 4 million total new additions, with 2.15 million coming outside the States. Total global subscribership was 53 million as of September.

The Netflix gift-card buzz shows an impressive level of loyalty to the brand. But clearly Wall Street is concerned that future growth will be tougher to achieve with powerful rivals such as Time Warner Inc.'s (TWX) HBO and others following Netflix's lead into the stand-alone subscription stream.