Netflix sets revenue, subscriber records in Q1, and it looks to calm Hollywood's fears

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Netflix (NASDAQ:NFLX) put together a strong first quarter, reporting that income rose 88 percent to $60.2 million, or $1.11 per share, up from $32 million, or 59 cents per share a year ago. The digital entertainment distribution company said it added 3.3 million subscribers that quarter, taking its global membership number to 23.6 million, nearly 70 percent more than it had a year ago. Netflix also reported revenue was up 46 percent from a year ago to $719 million. Revenue and earnings beat Wall Street estimates, which had expected $705.7 million in revenue and $1.07 EPS for the quarter.

The company also sought to appease Hollywood, which has looked at the company's growing subscriber base with trepidation.

Netflix CEO Reed Hastings, in a letter to subscribers, wrote that while "producers of movies and TV shows naturally enough fear Internet services will hurt their existing business," they should instead see its growth as an opportunity.

"Content owners that license to Netflix make more money - now and in the future - than content owners who don't license to Netflix," Hastings wrote. "A few media executives are still vocal about their fears of negative long-term impact on MVPD subscriptions from Netflix, but the evidence continues to pile up against their concerns. Our subscribers overwhelmingly enjoy both their Netflix and the variety of sports, current season TV shows, news and entertainment available through MVPDs."

Hastings also said the company would likely continue to test the original content waters, looking beyond the "House of Cards" deal it cut earlier this year, licensing "two or three similar, but smaller deals" as it experiments with different forms of content licensing.

Hastings said Netflix was "thrilled" to nearly double its subscription gains in the first quarter, but acknowledged that the company expects subscriber growth in subsequent quarters to become more difficult. It said that marketing spend in the first quarter was at record levels, and added that it expected its net subscriber adds to continue to exceed those of the prior year for the rest of this year.

"As always, we will remain focused on improving our service... increasing Y/Y net adds, as long as possible," he said.

Hastings also tipped his cap to competitors like Hulu Plus, Amazon Prime and Dish Networks, which recently bought Blockbuster Video's assets.

"We'll continue to push ahead, developing an ever-better user experience to differentiate Netflix, and exploring exclusive rights, where it makes sense, such as our ‘Mad Men' deal, so that we remain complementary to MVPD," he said. "Our competitive strategy relative to other streaming services is simply to grow as fast as we can, so we can afford more content, more marketing, and more R&D than our competitors."

For more:
- see this Netflix letter to subscribers

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