Netflix Streaming Subs Rebound - Broadcasting & Cable

Netflix Streaming Subs Rebound

Adds 220,000 subs for its domestic streaming service in the fourth quarter of 2011
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Netflix reported a larger than expected growth in its domestic streaming subscribers, adding 220,000 subs for a total of 21.67 million members in the fourth quarter of 2011, which helped boost overall revenues to $876 million for the quarter and $3.2 billion for 2011.

The company also reported that "we saw fewer streaming cancellations, as well as lower migration to DVD-only plans, resulting in the outperforming for streaming members."

But loses on its international services widened to nearly $60 million and overall net income declined to $41 million for the last quarter of 2011. Net income for the year totaled $231.6 million in 2011, up from $160.9 million in 2010.

The rebounding sub counts are encouraging news for Netflix, which had suffered significant subscriber losses in the third quarter of 2011 after it announced price hikes.

In a letter to shareholders, Netflix CEO Reed Hastings and CFO David Wells noted that the company faced increased competition in the streaming video space, particularly from the spread of TV Everywhere offerings, but argued that the companies was well positioned for the future given their investments in both library and original programming.

"As a result of the significant investments in our streaming library throughout 2011, our current domestic offering is dramatically improved from a year ago," they wrote.

With those acquisitions, the letter also downplayed the loss of the Starz titles in February. "For the Encore catalog titles we have plenty of substitutes and in many cases have already directly re-licensed from the studios some of the top performing Encore titles. So the only significant loss is the current 15 Disney output titles... which constitute about 2% of our domestic viewing."

Based on the better than expected streaming subscriber counts, the company also raised its outlook for the first quarter streaming contribution margin target from 8% to 11%.

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