Netflix Posts Huge Profit Increase

Netflix has reported a first-quarter profit of $60.2 million adding over 3 million subscribers in the US in the past 3 months, according to the New York Times. Reed Hastings, the company’s chief executive, indicates that the growth illustrated in the past three months looks like it will be sustained in the near future. However, analysts are not optimistic about the outlook for the company in the second quarter. In a recent letter to customers, the company itself said that the pace may slow in the coming months. According to an article in Financial Times, the company expects to post between $50-$70 million in operation losses in the second half of the year.

Despite this, the company has shown that it remains a force to be reckoned with in the online streaming industry. It has now drawn even with the largest cable television operator, Comcast, with 23.6 million subscribers total to its service. The company now is seeking ways to expand internationally. As an article from the Financial Times mentions, the company has already admitted that their future growth is dependent on their successes outside the US.

Recently the service was launched in Canada, and this is what the article attributes to the anticipated lackluster quarters ahead. The company expects to launch the service in a third international market by 2012, and at this point, the Canadian market should generate sustainable profits according to some analysts.

Regardless of the near-term outlook for the company, the company’s profits have risen from 493.7 million last year to 718.6 million as of last quarter. Given this, it seems the company may have found itself in a profitable niche market that outperforms competitors. iTunes has allowed renting of videos for between $0.99 and $3.99, but in comparison to the $7.99 per month charge offered at Netflix offering the user access to all videos and shows in its massive library, one would clearly choose the latter in terms of financial prudence.

Sources:

http://www.ft.com/cms/s/0/3e514d5e-6f96-11e0-952c-00144feabdc0.html?ftcamp=rss#axzz1KaU3zYgj

http://www.nytimes.com/2011/04/26/business/media/26netflix.html?partner=rss&emc=rss