Earlier this month, BTIG Research analyst Richard Greenfield
crunched some numbers and found that if
) were a cable TV network, it would probably be the highest rated
"We believe Netflix streaming per sub/day is now over 87 [minutes,
compared with 79 minutes last summer] and, in turn, Netflix is now
likely the most watched cable network, essentially in-line with the
) Channel," calculated Greenfield on the
The popularity of Netflix over cable networks was confirmed
yesterday when the Los Gatos, California-based company reported
According to its report, Netflix added over 2 million new US
streaming subscribers (3 million worldwide) in the first quarter,
bringing its total domestic subscriber count to 29.17 million.
That means that Netflix has officially surpassed
) in domestic subscribers for the first time ever,
points out. Based on data from SNL Kagan, HBO had 28.7 million
subscribers at the end of 2012.
Of course, HBO is still far and away the top dog globally, with
some 114 million subscribers worldwide, while Netflix's total
subscriber population stands at 36 million.
HBO also still has the edge in terms of paid subscribers. At the
end of March, Netflix's paid streaming subscriber count was 27.91
million, with the remaining customers signed on for the company's
free monthly trial.
Thanks to its stronger-than-expected subscriber growth - which
means an improved contributing margin since content costs are
spread over more customers - investors were impressed with
Netflix's first quarter, sending shares up 24% to above $200 in
after-hours trading on Monday. The stock is up some 90% so far in
Most analysts attribute Netflix's strong subscriber growth to its
focus on exclusive content, which the company hopes will
differentiate it from competitors like
(VZ) Redbox Instant, and
(AAPL) iTunes. In the first quarter, Netflix debuted its
high-profile and expensive original series,
House of Cards
, to great reviews.
"What we've seen with
House of Cards
is a nice impact but a gentle impact," said Netflix CEO Reed
Hastings in a conference call Monday evening.
Because of the company's heavy investment in original content (the
two planned seasons of
House of Cards
will cost $100 million) and rising non-original content acquisition
costs, Netflix actually reported negative free cash flow of $42
million in the quarter (though that was an improvement from
negative $51 million in the previous quarter).
In other words, Netflix is following the Amazon model: It's
bleeding cash as it attempts to dramatically scale up, but the
stock continues to rise anyway.
Once Netflix has reached subscriber saturation, the company will
have to start making money, either by reducing content costs (which
isn't likely, given that Amazon and other rivals will big fiercely
for content), or by raising revenue. The question, then, is whether
customers will accept a subscription fee that is higher than
$7.99/month. We'll find out soon as Netflix says it plans to
introduce a new $11.99/month plan that allows simultaneous
streaming on four devices.
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