Netflix's 4th-quarter earnings, stock soar as video service adds 2.3 million US subscribers
SAN FRANCISCO (AP) — Netflix's fourth-quarter earnings soared six-fold as the Internet video service added another 2.3 million U.S. subscribers to burnish its status as one of the world's most popular entertainment outlets.
The financial results announced Wednesday topped analyst estimates, and Netflix basked in Wall Street's adulation. The company's stock surged $57.88, or more than 17 percent, to $391.61 in extended trading.
Investors tend to focus more on Netflix's subscriber growth because the widening audience provides the company with the means to negotiate the rights to show even more compelling content to show in the future.
Netflix Inc. ended December with 33.4 million U.S. subscribers who stream video over high-speed Internet connections, up from 31.1 million in September. The company picked up another 1.74 million subscribers outside the U.S. to end last year with 10.9 million international customers.
The strong showing follows a year in which Netflix's stock nearly quadrupled in a resounding comeback from a steep downturn triggered during the summer of 2011 after the Los Gatos, Calif. company split apart its Internet video service and DVD-by-mail service. The division resulted in price increases of as much as 60 percent for customers who wanted to keep both options.
Netflix CEO Reed Hastings apologized and the uproar eventually died down as the company began stockpiling its $8-per-month streaming service with more original programming, such as the Emmy-award winning "House of Cards." The second season of that series will be released Feb. 14, contributing to management's optimism about its subscriber growth for the current quarter ending in March.
"It's a great start for the year, and that portends very well for us," Hastings said during an online video discussion of Netflix's fourth quarter and outlook. "We are excited about what is happening."
As more people connect their TVs to the Internet and buy mobile devices, Netflix's streaming service is emerging as a must-have pastime. Meanwhile, the DVD-by-mail service is gradually dying as more subscribers abandon watching video on physical discs. The company ended December with 6.9 million DVD subscribers, down from 13.9 million in September 2011.
In a reflection of the DVD's steadily declining role, Netflix closed plans to make a slight change in the appearance of the red envelopes that deliver the discs. The envelopes will now be stamped with the brand,"dvd.netflix.com," instead of Netflix's stand-alone brand in an effort to make the company's name more synonymous with Internet streaming.
Revenue rose 24 percent from the previous year to nearly $1.17 billion, just slightly above analyst forecasts.