I have to admit, when my brother Kevin told me he was an avid Netflix subscriber I looked at him like he was loonier than usual.

Netflix? You mean the guys who send you DVD's in the mail, then you watch'em and return'em? Those guys?

The business premise seemed arduous from a customer's perspective. Handling, locating, and usually losing DVD's at my house has risen to an art form. With three kids, our chances of losing "Daddy Day Camp" were three times as high, the way I looked at it.

It reminds me of that old Vince Lombardi line that there are three things that can happen when you pass a football and two of them are bad.

So what to make of Netflix today? Shares of the Los Gatos, Calif. company shot upward Wednesday after the online DVD rental pioneer said first quarter revenues should be significantly higher than Wall Street eggheads imagined.

Where did that come from? Netflix rose to 32.43, up $3.43 for the day, or 11.8% after the company now says it expects first-quarter earnings of 15 cents to 22 cents a share, up from its earlier forecast of 13 cents to 21 cents.

So the news is indeed good at Netflix. Revenue in the first quarter is now expected to be $324 million to $328 million, up from the previous prediction of $323 million to $328 million.
Netflix expects to end the March quarter with 8.16 million to 8.26 million subscribers, up from 7.85 million to 8.05 million.

For full-year 2008, Netflix anticipates that earnings will be $1.18 to $1.30 a share, up from $1.12 to $1.24 a share. Revenue is seen between $1.345 billion and $1.385 billion, up from the earlier forecast of $1.3 billion to $1.35 billion.

The company expects to finish the year with 8.9 million to 9.5 million subscribers, topping its previous outlook of 8.4 million to 8.9 million.

Jim Friedland, analyst at Cowen & Co., in an interview with CBS Marketwatch today, says he believes the increase in Netflix's outlook reflects the fact that DVD rental rival Blockbuster Inc. is struggling financially. "The most popular Total Access plan allows customers to take out three DVDs by mail and get five free exchanges in a Blockbuster store for $19.99 a month. Blockbuster in late December raised the fee for its Total Access service to $19.99 from $17.99."

In the same Marketwatch piece, Tony Wible of Citigroup says Blockbuster's price increase is also a factor, "as price sensitive consumers and former BBI power users are switching to NFLX ... As previously noted, we believe NFLX stands to gain up to 1.5 million [subscribers] from BBI as a result of the higher pricing," Wible said in a research note.

Says Marketwatch: "For a basic subscription rate starting at $4.99, Netflix customers rent DVDs online and have them delivered via first-class mail, complete with postage-paid return envelopes. Almost 95% of Netflix subscribers live in areas that can receive discs in one business day. The company has a library that carries more than 90,000 titles.
Netflix also offers downloads, giving customers the ability to watch more than 6,000 movie and TV titles on their PCs. It recently gave its traditional subscribers the ability to get unlimited downloads for no additional fee."

With Blockbuster and the other video rental mainstay, Movie Gallery, Inc, treading water at best and rewinding (and I don't mean that in a good way) at worst, look for Netflix to sustain its gains through spring and into the busy summer holiday renting season.

In a tough economic climate, movie rentals are good, cheap, clean family fun - as long as you don't lose them.

That means you, kids.