Netflix Profit Down as Subscribers Grow

Netflix says net income fell in the first quarter as it surpassed 40 million U.S. subscribers.

Net income was $24 million, or 38 cents a share, down from $53 million, or  86 cents a share, a year ago. The company blamed foreign exchange fluctuations for the earnings being lower than expected.

The company said operating income was $97 million, considerably above its forecast of $79 million.

Revenues rose to $1.4 billion in the quarter from $1.07 billion a year ago.

The company said international subscribers rose to more than 20 million, giving the company a total of 62.27 million subscribers, up from 48 million a year ago.

"Our original series, documentaries and comedy specials are being enthusiastically received, and member engagement is at an all-time high. Members streamed 10 billion hours in Q1, more evidence that consumers around the world are embracing the Internet TV revolution,” the company said in a letter to shareholders.

Netflix said its U.S. net added subscribers and revenue were higher than expected, resulting in higher margins. In the second quarter, the company plans to shift marketing spending overseas to take advantage of international growth opportunities.

Partly in reaction to Netflix’s success, HBO recently launched its own streaming service HBO Now. 

"As we have said in the past, Netflix and HBO are not substitutes for one another given differing content. We think both will continue to be successful in the marketplace, as illustrated by the fact that HBO has continued to grow globally and domestically as we have rapidly grown over the past 5 years,” the company said. "We view 'Internet MVPD’ offerings like the rumored Apple offering, Sony’s Playstation Vue and Dish’s Sling TV as more competitive to the current pay TV bundle than to Netflix which is lower cost, has exclusive and original content, and is not focused on live television."

Netflix said it would seek shareholder approval for a stock split. 

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.