Netflix on the verge of hitting 100 million subscribers

Netflix's first-quarter earnings, released today, revealed there's one area it has no interest in competing in: live TV.

Netflix added another 3.53 million subscribers internationally last quarter, along with 1.42 million in the U.S. Analysts expected 3.71 million net additions internationally and an additional 1.56 million customers in the U.S.

Over the past ten years what really did it for Netflix was the emergence of phones and tablets that enabled people to watch videos with mobility, said Wedbush Securities analyst Michael Pachter.

Meanwhile, Bloomberg reported that analysts had predicted that Netflix would add 5.49 million new users in the first quarter.

Wall Street was expecting 5.27 million new subscribers.

The understated reaction reflects Hastings' ambition to build the world's largest video channel. US paid net additions of 1.47 million missed guidance of 1.96 million by even more.

The Los Gatos, California firm presently has a market value of around $63 billion. In today's time, its stock has increased from $US1.90 to $149.15.

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For all its progress, Netflix still has ways to go ahead before it reaches to HBO's mark, the successful pay-TV channel that has helped as its role model. Combined, Netflix claims 94.36 million paid subscribers worldwide.

Responding to the emergence of "virtual MVPDs" like Sling, YouTube TV and Hulu's upcoming OTT service, the shareholder letter noted: "We believe VMVPDs will likely be more directly competitive to existing MVPD services since they offer a subset of the same channels at $30 to $60 per month, and may appeal to a segment of the population that doesn't subscribe to a pay-TV bundle".

The trend has confronted Netflix with more competition in the battle for household entertainment budgets. The year-on-year growth in streaming revenue was slightly down from last quarter, but still impressive at 38.8 percent. On the other hand, the lack of big-budget productions boosted net income.

Netflix plans to spend US$1 billion (S$1.4 billion) this year on marketing to attract subscribers. "At that point, Netflix might disrupt itself again, as it's done throughout its history with innovations such as DVDs by mail, subscription monetization, digital streaming and original content". It lost some long-time US subscribers after their rates went up by as much as $2 per month previous year. The surge in subscribers of US-based Netflix comes after it invested heavily in overseas markets.

Hastings argued that the market is big enough to accommodate everyone, noting that Amazon offers "great programming" and that HBO continues to grow. Considering it pulled in first quarter profits of $US178 million ($235 million), or 40 cents ($0.53) a share, that seems like a wise move.

Netflix said its recent release of the Dave Chappelle specials "The Age of Spin" and "Deep in the Heart of Texas" were among its most viewed comedy specials.

A costly global expansion has depressed Netflix's profits.

The firm increased revenues by over a third to $2.64bn for the quarter compared to the first three months of previous year, while net income rose to $178m from $28m.

(Copyright © 2015. All Rights Reserved.)
 
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