Netflix trades user growth for profits
For now, Netflix investors can have rapid subscriber growth or a big jump in profit — not both.
The streaming-video giant reported first-quarter user gains that fell short of estimates because there wasn’t a “House of Cards”-style hit to draw new viewers and retain others.
On the other hand, the lack of big-budget productions boosted net income. Next quarter, with the return of “House of Cards” and three major movies on the release schedule, profit will miss estimates while customer gains will improve, Netflix said Monday.
The world’s biggest paid video service signed 4.95 million new customers last quarter, less than the 5.49 million analysts were expecting. It’ll make up some of that in the current period, with a forecast for viewer growth that beat analysts’ forecasts.
“There’s nothing here that changes the thesis,” said Anthony Di Clemente, an Instinet LLC analyst. “If you own Netflix because you think they are going to add subscribers globally, you’re still going to own it. If you don’t own it because you think Netflix was spending too much money to invest in said growth, you still feel the same way.”
Netflix needs to add millions of subscribers every quarter to help pay for the billions of dollars the company spends making TV shows and movies or licensing programs from others. The company, which has committed $15.3 billion for movies and TV shows over the next five years, hasn’t given any indication it plans to slow those outlays and said Monday it plans to raise money this quarter by issuing long-term debt.
Netflix released 17 standup specials, nine feature films and an array of original series for kids and adults, but blamed the absence of one show — “House of Cards” — for its slower-than-projected viewer growth.