Earnings

Netflix Says Apple Not A Threat

Netflix’s first quarter earnings results showed the highest net additions of subscribers measured on a quarterly basis at 9.6 million new subscribers, up 8 percent year on year. That came in above the 8.9 million that had been expected.

In terms of headline earnings numbers, the total sales for the company were in line with estimates at $4.5 billion, and up 22 percent year on year. The bottom line was $.76, well above the $.57 per share that had been expected by the company.

Looking to the current (second) quarter, the firm expects to add 5 million subscribers, with 300,000 from the U.S. It’s been well noted that a price increase may lead to churn, said the company, and there has been some churn in the ranks of the company itself, as Netflix is looking to replace departing Chief Marketing Officer Kelly Bennett.

The 300,000 net additions expected by the company comes against the 650,000 domestic additions that had been expected by Wall Street, Recode reported. International growth in the latest quarter came in at 7.9 million subscribers. The total subscriber tally now stands at 149 million subscribers.

In its shareholder letter, management wrote that competition from companies like Apple need not be a threat to operations. As the company said, “We don’t anticipate that these new entrants will materially affect our growth because the transition from linear to on-demand entertainment is so massive, and because of the differing nature of our content offerings. … We believe there is vast demand for watching great TV and movies, and Netflix only satisfies a small portion of that demand.”

The letter pointed to a precedent for such sentiment: U.S. cable networks grew “for years, as viewing shifted from broadcast networks during the 1980s and 1990s).” During a live interview that was streamed after the earnings were released, Netflix CEO Reed Hastings said he’s unconcerned about the loss of content from third-parties and is focused on building up Netflix’s own original content library.

“We’ve expected this decline of second-window content, been ready for it, anticipating it,” Hastings said. “In fact, we’re eager to be able to have more and more of our money to be able to do spectacular new titles.”

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