The company’s stock soared on Monday, passing $200 a share in after-hours trading for the first time since 2011, after it reported robust first-quarter earnings and hailed the success of its first original series, “House of Cards.” By one measure Netflix now has more subscribers than HBO in the United States.
Netflix also announced a new subscription option that might help it profit from the practice of password-sharing for its streaming video service. The existing service (which costs $7.99 a month) limits subscribers to two simultaneous streams.
Soon, the company said Monday, it will offer an option that allows four simultaneous streams for $11.99. The company said this would be meant for big families.
For the first quarter of the year Netflix posted a profit of $3 million, or 5 cents a share, versus a loss of $5 million, or 8 cents a share, in the same quarter a year earlier.
Quarterly revenue topped $1 billion for the first time, largely because the company continued to add subscribers to its streaming service quickly; it gained about two million such subscribers in the United States in the first quarter. After the subscriber data was released, analysts rushed to note that Netflix, with 29.2 million such subscribers, had apparently surpassed HBO.
Michael Olson, an analyst at Piper Jaffray, also pointed out that Netflix’s two million new subscribers beat industry expectations of about 1.7 million. “It appears original programming may be driving better subscriber numbers,” he said. “At the least, we believe original exclusive programming is reducing subscriber churn.”
While HBO, a unit of Time Warner, does not publish detailed subscriber data, the research firm SNL Kagan estimated that the cable channel had 28.7 million subscribers at the end of 2012.
There are, however, some big differences between the two companies. HBO is part of the cable bundle, while Netflix is a stand-alone service with both streaming and DVD-by-mail options. HBO declined to comment on the subscriber competition on Monday.
In a letter to shareholders, Reed Hastings, Netflix’s chief executive, and David Wells, its chief financial officer, didn’t mention HBO, as they have in the past. Instead they praised “House of Cards,” the series starring Kevin Spacey and Robin Wright that made its debut in February and was described by critics as something that would fit HBO or its cable rival Showtime.
“The launch of ‘House of Cards’ provided a halo effect on our entire service,” Mr. Hastings and Mr. Wells wrote. Although the two men did not share ratings for the show, they said the subscriber reaction “increased our confidence in our ability to pick shows Netflix members will embrace and to pick partners skilled at delivering a great series.”
(Privately, Netflix executives say they want to release viewership data but don’t want to set a precedent for later, potentially less popular shows.)
Because all 13 episodes of the series were posted online on the same day, there was some concern that new subscribers would not remain after watching them. But the company said it found fewer than 8,000 cases where people signed up, watched “House of Cards” and then canceled their subscriptions.
Netflix has cautioned investors and reporters that its original shows, while highly visible, are not a huge part of its content expenses or its total viewing time. But the shows do exemplify how Netflix and HBO are increasingly competing for actors, directors and creative ideas, not to mention viewer attention.
Netflix’s second entry, a horror series from Eli Roth titled “Hemlock Grove,” received mixed reviews, but according to Mr. Hastings and Mr. Wells’s letter it was “viewed by more members globally in its first weekend than was ‘House of Cards’ and has been a particular hit among young adults.”
Its third series, a 15-episode revival of the Fox sitcom “Arrested Development,” will go online on Memorial Day weekend in May. The company says it expects the highly anticipated series to draw new subscribers in what is typically a weak quarter.
It predicted that it would end the second quarter with about 29.4 million to 30.05 million streaming subscribers in the United States. In an improvement over analysts’ prior forecasts, it projected earnings in the second quarter of 23 to 48 cents a share.
The company’s executives seem to be girding themselves for the possibility — or the inevitability — that some of its series will be flops.
On Monday they took a long-term view, stating that the value of the original series would be “borne out as we add more seasons of already popular shows like ‘House of Cards’ and further series.”
“ ‘Harry Potter’ was not a phenomenon in Book 1, compared to later books in the series,” Mr. Hastings and Mr. Wells added.
Netflix stock, which closed at $174.37 before the earnings announcement, surged by more than 25 percent afterward. By 5:30 p.m. it was trading at $216.40.
Article source: http://www.nytimes.com/2013/04/23/business/media/netflix-reports-strong-revenue-on-strength-of-subscribers.html?partner=rss&emc=rss