Netflix Impresses with Earnings, Online Subscribers
By: The online DVD rental giant, Netflix , continued its strong run and shares rose after hours. Not only is Netflix growing subscribers — up 31 percent from a year ago — but also it's growing the number of people who watch streams online. When I interviewed CEO Reed Hastings at CES earlier this month, he stressed that Netflix's future is all about digital distribution.
It looks like the future is now -- nearly half of its subscribers watched video online this past quarter, up from less than 30 percent a year ago. And with Netflix being embedded in more and more devices (a dozen more were announced earlier this month around CES) digital distribution is sure to continue to grow.
After the bell Wednesday Netflix reported a 36 percent increase in fourth quarter profit on a 24 percent increase in revenue. The company ended the quarter with 12.3 million subscribers, 10 percent more than it had in the third quarter. The fact that Netflix managed to grow its customer base by a third over the past 12 months, during a dramatic recession and pullback in consumer spending, is telling. It speaks to the fact that consumers see Netflix as a real value.
Netflix isn't just adding customers; it's also holding onto them and spending less to acquire them. Churn dropped to 3.9 percent from 4.2 percent and subscriber acquisition cost dropped to $25.23, down about a buck and a half from a year ago.
And Netflix deserves kudos for mixing up the usually stiff and stilted earnings call format. The call was all Q&A, with questions all submitted via e-mail. Execs usually just read "management commentary" that comes at the beginning of a call, so this format keeps the conversation from being canned.
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