Watch Out HBO, Netflix Is After You

Apr 21 2014, 4:30pm CDT | by

Tough nosed politician Frank Underwood, the lead character in hit Netflix series House Of Cards, will stop at nothing to get what he wants. If the video streaming powerhouse’s management is anything like their star HBO better watch out. In a letter to shareholders Monday Netflix CEO Reed Hastings and CFO David Wells were not shy about their ambition to overtake the reigning content king.

Hasting and Wells first pointed out that a Morgan Stanley report from March showed that 17% of consumers surveyed felt Netflix was the service that offered the best original programming, “second only to HBO.” Then the men concluded their seven page letter by saying, “We are approaching 50 million global members, but that is far short of HBO’s 130 million. We are eager to close the gap.”

Netflix’s first quarter earnings report shows that the company is on its way.

Netflix reported $1.1 billion in first quarter revenue, up 36% from the same period last year. Net income came in at $53 million, up from just $3 million a year ago and almost $2 million ahead of Wall Street analysts’ consensus estimate. Earnings per share were 86 cents, 4 cents ahead of the Street estimate.

As the company previously estimated, it finished the first quarter with 48 million subscribers, adding 2.3 million subscribers in the United Stated and 1.8 million in international markets.

Looking to the second quarter, the company expects revenue to come in at $1.13 billion, net income to be $69 million and earnings per share to come in at $1.12. By the end of the quarter Netflix anticipates having 49.8 million members.

Netflix shares initially turned to the red in after hours trading following the release, but the fan favorites’ fortune changed quickly and shares were up around 6.5% to $371 within 45 minutes of the release. In recent memory, however, Netflix has been a momentum name known to shoot up on not much news at all.

The stock gained 300% in 2013 but is down about 4% so far this year. Shares shot up 16% within seconds of its stronger than anticipated fourth quarter report in January, hitting the $450 range in mid March. By the end of that month the video streaming phenomenon had shed close to $100 in value amid a broad tech and momentum sell-off.

So there are at least two potential causes for the relatively muted investor response Monday.

First is that investors were simply expecting more. According to a report by broadband data company Procera, 16% of the Netflix subscribers on one U.S. cable provider watched at least one House Of Cards episode in the first 24 hours the hit show’s second season was live (Valentines Day). That’s eight times more people than watched when the first season launched a year earlier. This news led many to believe the 48 million was a conservative subscriber growth estimate.

“House of Cards, for which Season 2 debuted in February, attracted a huge audience that would make any cable or broadcast network happy,” wrote Hastings and Wells. “The on-demand nature of Netflix means that as we promote Season 2, we can still see significant new enjoyment of Season 1.”

The other reason is that Netflix announced plans to raise its prices. New members will pay either $8.99 or $9.99 per month for Netflix, while existing members will stay at the $7.99 rate that has been in effect since the company introduced streaming in 2010. The company expects to roll out the increase later this quarter. In its last earnings letter the company revealed it had been exploring a tiered pricing plan but said it was “in no rush to implement.”

The 10 Names Retail Investors Traded Most In 2013

Follow @samsharf

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

EU to fund agricultural products affected by Russia's ban
Brussels, Aug 23 (IANS) Experts of the European Union (EU) said Friday that the EU would provide additional funding for agricultural products affected by Russia's food import ban.
 
 
Irish man tests negative for Ebola virus
Dublin, Aug 22 (IANS) Laboratory test samples of an Irish man, who died after recently returning from Africa, have proved negative for Ebola virus, health authorities in Ireland said Friday.
 
 
Soyuz rocket carrying two Galileo satellites lifts off
Brussels, Aug 22 (IANS) A Soyuz rocket carrying two Galileo satellites, the fifth and sixth of Europe's Galileo global satellite navigation system, lifted off from the spaceport in French Guiana Friday, the European Space Agency (ESA) has announced.
 
 
Fresh cases of Ebola recorded in Nigeria: Official
Abuja, Aug 22 (IANS) Fresh cases of the Ebola virus disease have been recorded in Nigeria, where the highly contagious disease has already claimed five lives, Minister of Health Onyebuchi Chukwu said Friday.
 
 
 

Latest from the Network

Katie Holmes moves from NY to California
Los Angeles, Aug 23 (IANS) Actress Katie Holmes, who has been living in New York for two years with her daughter Suri, has now shifted back here. Holmes lived here during her marriage to star Tom Cruise, and then...
Read more on Celebrity Balla
 
Lebanon cautions against repercussions from Syrian crisis
Beirut, Aug 23 (IANS) Lebanon's social affairs minister Rachid Derbas cautioned Friday that the "country is on the verge of drowning" and it cannot bare anymore the repercussions of the Syrian crisis and Syrian...
Read more on Politics Balla
 
EU to fund agricultural products affected by Russia's ban
Brussels, Aug 23 (IANS) Experts of the European Union (EU) said Friday that the EU would provide additional funding for agricultural products affected by Russia's food import ban. On the emergency support measures...
Read more on Business Balla
 
'Iron Man 3' director to make 'The Destroyer' film
Los Angeles, Aug 23 (IANS) Shane Black, who directed "Iron Man 3", will now go behind the camera for a movie adaptation of action book series "The Destroyer". He will direct the film, based on the 1970s adventure...
Read more on Celebrity Balla
 
170 illegal immigrants missing off Libyan coast
Tripoli, Aug 23 (IANS) A wooden boat carrying some 170 illegal immigrants was missing off the Libyan coast near Tripoli Friday, a coast guard official said. The stowaways were believed from sub-Saharan African...
Read more on Politics Balla
 
NATO chief condemns Russian aid convoy entry into Ukraine
Kiev, Aug 22 (IANS) NATO Secretary General Anders Fogh Rasmussen Friday condemned the entry of a Russian humanitarian convoy into Ukrainian territory without Kiev's consent and without involvement of the International...
Read more on Politics Balla
 
64 killed in Iraq mosque attack
Baghdad, Aug 23 (IANS) At least 64 people were killed Friday when suspected Shia militiamen attacked a Sunni mosque in Iraq's eastern province of Diyala, a media report said. A bomber blew himself up and other gunmen...
Read more on Politics Balla
 
UN to hold emergency meeting on Ukraine crisis
United Nations, Aug 23 (IANS) The UN Security Council is to hold emergency consultations amid media reports of a major escalation in the Ukraine conflict. The emergency session, scheduled for Friday evening, was...
Read more on Politics Balla
 
EU deplores Russia's humanitarian convoy into Ukraine
Brussels, Aug 23 (IANS) The European Union (EU) Friday deplored as illegal Russia's decision to send humanitarian consignment into Ukrainian territory without escort of the International Committee of the Red Cross (...
Read more on Politics Balla
 
US targets key financiers of Al Qaeda, Al Nusra Front
Washington, Aug 23 (IANS) The US Friday imposed sanctions on two alleged key financiers of al-Nusra Front and Al Qaeda, authorities said. Abdul Mohsen Abdullah Ibrahim Al-Sharikh and Hamid Hamad Hamid Al-Ali were...
Read more on Politics Balla