Reports suggest studios should be afraid, very afraid (of Netflix)

A couple of new reports this week suggest that Netflix's effect on Hollywood will be an even scarier than movie moguls thought.

Citigroup analyst Mark Mahaney says Netflix's US customer base will double to 50 million by 2013, and the company is beginning to grow even faster elsewhere. That's what's happening in Canada, Netflix's first market outside the U.S. In less than a year, it has signed up 8% of Canadian households - a task it took five years to complete in the U.S. Netflix will likely be in two to three more nations by year-end 2012, Mahaney wrote. By Citi's calculations, expanding to 20 countries in Europe and Latin America will add 43 million households if Netflix matches the percentage of households it serves in the U.S. now. That changes the balance of power in the running tug-of-war between studios and Netflix over what movies Netflix is allowed to stream, and what it should pay for them.

A second report this week comes from Digital Entertainment Group, saying that sales of DVDs fell 20% in the first quarter to $2.1 billion, further crippling a revenue stream studios have counted on.