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Netflix Adds 3 Million Subs, Posts $3 Million Profit

22 Apr, 2013 By: Erik Gruenwedel

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.

"'Hemlock' viewing has been fantastic for us and as fantastic as the 'House of Cards' is, 'Hemlock' is getting viewed by even more subscribers in its first couple of days in opening weekend than 'House of Cards.' So we are feeling very good about our original strategy including the release strategy of being focused on all episodes at once.," 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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