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Good News for Netflix

25 Jul, 2005 By: Holly J. Wagner



Netflix stock got a pop today from news that the company's subscriber count has more than doubled in a year, and the company expects to be profitable this year.

In earlier forecasts, executives had said they expected to lose money this year as the company fends off competition from Blockbuster Online. But Monday, Netflix reported its subscriber count was 53 percent higher in the second quarter ended June 30 than in the same quarter last year.

Revenue for the quarter was $164.5 million, and CEO Reed Hastings said the company is on track to launch downloads and achieve profitability by the end of the year.

Hastings also said the service now offers 50,000 titles, up from 40,000 in the first quarter, because it has invested in more titles from smaller suppliers.

Revenue for the second quarter of 2005 was $164.5 million, up 37 percent from $120.3 million for the second quarter of 2004 and up 7 percent from $154.1 million for the first quarter of this year.

In a call with analysts, Hastings said he believes there is still time for a compromise in the high-def format war, and that high-def discs will extend the life of DVD for the foreseeable future.

Although Netflix plans to launch downloadable movies by the end of the year, Hastings has long said he expects the market for downloads to remain small as long as studios are making the lion's share of their film revenue from DVD.

During the quarter, Netflix refined some of the Web site features, including the addition of “mouseovers” that let viewers see more information about a film without clicking through to the full details and improvements to the Netflix Friends social feature. About 10 percent of Netflix users have signed on to use the Friends feature since it launched six months ago, Hastings said.

He also said the service now offers 50,000 titles, up from 40,000 in the first quarter, because it has invested in more titles from smaller suppliers.

Analysts are waiting to see if Amazon.com — which has launched online rentals in the United Kingdom and Germany in recent months — will enter the U.S. rental market. Hastings said he believes now that “Amazon's direct entry into the market seems both less formidable and less likely.”

Netflix raised its guidance for the year, estimating it will end the year with between 3.85 million and 4.15 million subscribers, and revenue in the $678.1 million to $688.1 million range, up from a previous guidance of $660 million to $685 million.

Revenue for the second quarter of 2005 was $164.5 million, up 37 percent from $120.3 million for the second quarter of 2004 and up 7 percent from $154.1 million for the first quarter of this year.

The company's stock gained 56 cents, to $16.96 before the market closed on Monday, then rose another $1.74, to $18.70, in after-hours trading.

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