Netflix profit skyrockets as subscriber growth continues
Netflix’s profit jumped dramatically in the fourth quarter as it added more than 4 million subscribers around the globe, bringing its total to more than 44 million members.
The streaming giant posted profit of $48 million, or 79 cents per share, an increase of more than 500% from the fourth quarter of 2012, when it had earnings of $8 million, or 13 cents per share. Revenue grew almost 25%, to $1.18 billion from $945 million.
Netflix said it expects to close in on 50 million subscribers and $50 million in profit at the end of the first quarter of 2014.
Wall Street reacted positively to the news, pushing Netflix stock up 17% to $391.77 in early after-hours trading.
Netflix has been spending significantly on original shows, including the critically acclaimed dramas “House of Cards” and “Orange Is the New Black.”
In the U.S., Netflix said it added 2.33 million subscribers, bringing its total here to 33.4 million. For the first quarter of 2014, Netflix is projecting adding 2.25 million subscribers.
Overseas, the number of subscribers broke the 10-million mark and should hit 13 million by the end of March. Netflix said it was planning a “substantial European expansion” this year.
In a letter to shareholders, Netflix said it is considering changes to its $7.99 monthly streaming fee to better fit consumer needs. It has been experimenting with a $12-per-month plan that would allow four people in the same household to stream the service at the same time. The company is considering a low-budget offering for $6.99 per month.
“Eventually, we hope to be able to offer new members a selection of three simple options to fit everyone’s taste,” Netflix Chief Executive Reed Hastings and Chief Financial Officer David Hastings wrote.
The duo also said current members would get “generous grandfathering of their existing plans and prices” meaning that there would be “no material near-term revenue increase from moving to this potential broader set of options.”
Although some analysts and media watchdogs have expressed concern that a recent federal court ruling eliminating the Federal Communications Commission’s Open Internet or net neutrality rules could harm Netflix, company executives were not concerned.
“No real change” is what Hastings said when asked on an analyst webcast about the ruling’s potential effect on Netflix. The worry is that without so-called net neutrality rules, Internet service providers could charge Netflix more to stream its content.
If that were to happen, Netflix said it would push its subscribers to fight back against their Internet providers.
Follow Joe Flint on Twitter @JBFlint.
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