On-demand video-streaming service Netflix has posted its earnings call for the first quarter of 2013, citing more than 4bn hours of viewing by 36m subscribers worldwide – 7.14m of which are located outside the US – and global revenue of US$1.024bn.
In total, Netflix added 3m members in Q1, with strong growth coming from its domestic US market. More than 2m members were newly signed up in this region, and Netflix credits this to the successful launch of its original series House of Cards, as well as improved streaming.
This gives Netflix a total of 29.17m US subscribers, surpassing rival HBO with 28.7m subscribers for the first time. Unsurprisingly, based on these figures, shares in the company rose following yesterday’s announcement.
Despite concerns that some users would sign up for a free trial of one month, watch all episodes of the exclusive series and then bow out before becoming a paid subscriber, Netflix reports that less than 8,000 users signed up to watch House of Cards in this way, out of millions of free trials registered during the quarter.
The US market will soon see a new ‘family plan’ priced at US$11.99 per month that will allow users to stream simultaneously to up to four devices. Currently, users can watch Netflix on two devices at once and it’s believed they are plenty satisfied with this allowance as only 1pc of US members are expected to sign up for the new plan.
Growing international market
Netflix’s membership outside of the US, which generated 14pc of total revenue this quarter, grew by 1m. This is lower than the previous quarter (1.8m) and Q1 2012 (1.2m), but it’s worth noting that the service launched in UK and Ireland and the Nordic countries, respectively, during these periods.
Netflix has revealed that a new market will be added in Europe in the latter half of this year, but we’ll have to wait for the next earnings call in July to find out where exactly.
Focus on original and exclusive content
Netflix plans to continue with its original content strategy, as well as improving the quality of its streams. Horror series Hemlock Grove debuted last Friday, with more views than House of Cards on its first weekend, and next quarter we’ll see the effect an exclusive new season of cult favourite Arrested Development will have.
In terms of licensing, Netflix has reached an agreement with Warner Bros Television to secure complete previous seasons of NBC’s Revolution and Fox’s The Following, while a deal with Fox Television Studios will bring episodes of The Killing season 3 to subscribers in the UK, Ireland and the Nordic countries days after the US broadcast.
With deals like this, Netflix is now less willing to continue with non-exclusive agreements for bulk content, which is why it will allow its deal with Viacom Networks for BET, MTV and Nickelodeon to expire at the end of May and instead is negotiating to license specific shows.
Explaining this strategy, CEO Reed Hastings and CFO David Wells make reference to a pop culture phenomenon in their letter to shareholders. “Long term, we believe the value of our original series in driving acquisition and retention improvements will 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 one, compared to later books in the series,” they wrote.
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