Netflix Reports Higher Earnings and Subs

Stock falls on 2Q outlook
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Netflix reported higher first-quarter earnings as it has added more subscribers than expected both in the U.S. and internationally.

The company also plans to spend $6 billion on content next year, up from $5 billion this year.

But the stock fell because of the company's more conservative forecast for the second quarter.

The streaming video giant said it had net income of $28 million, or 6 cents a share, up from $24 million or 5 cents a share a year ago.

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Revenues were $1.8 billion, up from  $1.4 billion a year ago. The revenue number was slightly below Wall Street expectations.

The company will face new pressures as it raises the price it charges subscribers, plus new competition for Amazon.com, which offered its stream service unbundled with its delivery service at a lower monthly price.

For the seconds quarter, Netfoxk said it expects to add 2.5 milion subscriber, with 500,000 of those coming in the US. and 2 million coming overseas. That would be down from the first quarter and from the second quarter of 2015.

"Our international forecast for fewer net adds than prior year is due to a tough comparison against the Australia/New Zealand launch," the company said. ". While [Australia and New Zealand are]  growing steadily this Q2, it is less than the launch spike last year."

The company said the so far in the second quarter International net adds are down sequentially both due to standard seasonality and our launch in 130 countries at very beginning of Q1--with Q1 capturingthe initial surge of sign­ups..

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In total Netflix said it added a record 6.74 million subscribers in the first quarter, topping the previous mark of 5.59 million in the fourth quarter of 2015.

“Performance in the quarter benefited from the launch of several series, including Making a Murderer (a late December debut), Fuller House (February), House of Cards Season 4 (March) and Daredevil Season 2 (March), complemented by a diverse mix of new films, documentaries, series and kids shows available globally, the company said in its letter to shareholders.

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Earlier this year, Netflix announced a broad international expansion.

“Our established markets around the world are all growing, and in early Q1 we added 130 more countries,” the company said. “By expanding broadly at once, we are learning more quickly about how best to please consumers across a wide variety of cultures and markets. In most of these markets, so far, Netflix is offered only in English and payment methods are limited primarily to international credit cards. In the coming quarters, we will add more local languages, content, payment options and customer support.”

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Netflix said that as it increases its prices it expects only “modestly increased churn.”

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It expects the bulk of customers to stick around “partly because these members have been with us for a reasonable period already, and because our content continues to improve.”

With the higher rate, Netflix said it will be able to invest more than $6 billion in content in 2017, up front $5 billion 2016.

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