Netflix Drives Record 4.9M New Subs in Q1

Shares Jump 11% Upon Beating Forecast of 4.1M Global Adds
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Led by better than expected growth in the U.S. and other corners of the globe, Netflix added a record 4.9 million new streaming subs worldwide in the first quarter, soundly beating its forecast of 4.1 million.

Netflix ended the period with 59.62 million subs, and expects to add a more modest 2.5 million in the second quarter.

In the U.S., Netflix added 2.28 million subs, extending its total to 41.40 million. It expects to add 600,000 in the second quarter.

On the international front, Netflix added 2.6 million subs, giving it 20.88 million, and expects to add another 2.9 million in the category during Q2 as it benefits from recent launches in Australia and New Zealand, which adds 8 million broadband subs to its addressable market. Netflix is slating a launch in Japan later this year.

While international subs were on the upswing, Netflix said the strong U.S. dollar hit earnings. Netflix posted net income of $24 million (38 cents per share), versus $53 million (86 cents per share) in the year-ago period. Revenues climbed to $1.4 billion in Q1 versus $1.07 billion in the year ago period.

Those reduced earnings didn’t hurt Netflix’s stock, which is was up $54.54 (11.47%) to $530 each in after-hours trading Wednesday. Netflix also announced it is seeking shareholder approval for an increase in our authorized shares, and that, if approved, expects to recommend a stock split. 

Netflix does not publicize streaming figures on a show-by-show basis, but said the third season of original series House of Cards “had its biggest launch yet in terms of viewers.”

Expect Netflix to keep pressing its original content. 

“We are increasingly spending on the promotion of our original content rather than emphasizing attributes of the Netflix brand and service that are now more familiar to consumers,” Netflix said in a letter to investors. “Early tests in international markets suggest this content focus is aiding member acquisition.”  

Netflix also plans to roll out an enhanced TV UI in the second half of the year, and is working on new ways to promote Netflix originals “using our data to help identify which members would be most likely to enjoy each original title.”

Netflix also said it has had second thoughts about its decision to work with ISPs in Australia on a non-metered version of its service that helped subs sidestep data consumption caps.

Though this sort of zero-rated service is common in Australia, “[w]e should have avoided that and will avoid it going forward,” Netflix said. “Fortunately, most fixed-line ISPs are raising or eliminating data caps in line with our belief that ISPs should provide great video for all services in a market and let consumers do the choosing.”

Netflix also weighed in on HBO Now, HBO’s new stand-alone OTT service, reiterating its believe that Netflix and HBO aren’t substitutes for one another.  It also views virtual MVPDs such as Sling TV and PlayStation Vue “as more competitive to the current pay TV bundle than to Netflix which is lower cost, has exclusive and original content, and is not focused on live television.”

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