Netflix Adds 3 Million Subs, Posts $3 Million Profit
22 Apr, 2013
By: Erik Gruenwedel
Home Media Magazine
http://www.homemediamagazine.com/netflix/netflix-adds-3-million-subs-posts-3-million-profit-30227
Service bows new $11.99 family plan doubling the number of devices that
can stream content simultaneously
Netflix April 22 again defied naysayers, adding 2 million domestic
subscribers and 1 million international subscribers in the first quarter
(ended March 31). It now has more than 36 million subs globally.
The Los Gatos, Calif.-based rental service reported net income of $3
million on revenue of more than $1 billion, compared with a loss of $5
million on revenue of $870 million during the previous-year period.
The domestic streaming business generated $131 million in contribution
income based on more than 29 million subscribers. Netflix disc rental
business generated $113 million in operating income based on just less
than 8 million subs.
Netflix’s international segment reported a $77 million contribution loss
while gaining 1 million subs. The segment now has 7.14 million subscribers.
The disc rental segment lost 240,000 subs, the least amount over the
past year.
“For DVD, factors such as a robust holiday DVD release slate and
publicity for new movies created by the awards season telecasts likely
influenced this pattern, boosting Q1 relative to Q4,” CEO Reed Hastings
and CFO David Wells said in a note to shareholders.
Meanwhile, Netflix announced it is offering a new family play for $11.99
a month that allows up to four devices within the home to simultaneously
stream content — up from the current two device limit. Netflix allows up
to six devices to be connected in the home.
"A few members with large families run into our 2-simultaneous-stream
limit," Hastings and Wells wrote. "To best serve these members, we’re
shortly adding a 4-stream plan, at $11.99 in the U.S."
Hastings said he doesn't expect more than 1% of Netflix's current
subscriber base to opt for the new family plan.
Viewership of Netlfix's original horror series, 'Hemlock Grove," during
its first weekend was higher than "House of Cards" during its first
weekend, according to CEO Reed Hastings.
"[We're] feeling very excited” about the original shows which provide a
very nice redefinition and broadening of what Netflix is," Hastings said
in an April 22 fiscal call.
Hastings said a series launch party in Mexico -- the first for Netflix
-- helped the program generate additional buzz. Netflix doesn’t divulge
viewership totals for any of its programming.
Separately, the CEO said Netflix would allow the license agreement with
Viacom to expire, moving forward licensing select programs for regional
areas.
Wedbush Securities analyst Michael Pachter said the subscriber growth
results were at the high end of guidance.
“The domestic subscriber number was great [and] clearly helped by
[original programming] “House of Cards”,” Pachter said.
B. Riley & Co. analyst Eric Wold reiterated that the buzz surrounding
“Cards,” just launched “Hemlock Grove,” and pending “Arrested
Development” was spurring potential subscribers.
“It clearly demonstrates the power of Netflix’s original programming
effort, as streaming subscribers exceeded expectations,” Wold said.
The results shot Netflix stock into the stratosphere with shares trading
around $217 after closing up $11 at $174.37 a share.
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