Netflix posted its Q1 2013 earnings report late yesterday afternoon, and the coverage has focused on two things: revenue and membership. Specifically, how much did Netflix’s first major original series, the Kevin Spacey-star-studded House of Cards, contribute to the company’s higher membership total, and consequently, revenue?
To get the money stuff out of the way, here’s the quick rundown: Netflix topped $1 billion in quarterly revenue for the first time, with a net income of $3 million at 5 cents a share. Excluding debt-related charges, net income stood at $19 million at 31 cents a share, nearly doubling analysts’ expectations of 18 cents a share. This led to a 25% bump in Netflix’s stock price in after-hours trading.
Domestically, Netflix added 2 million subscribers during Q1 2013, bringing its total to 29.17 million. Surely House of Cards hype, which followed Netflix’s aggressive advertising push wrought with that ominous picture of Spacey sitting on Lincoln’s chair, had an impact. Netflix also made the first episode of the 13-episode first season available for free, without requiring non-Netflix members to sign up for a subscription.
Netflix CEO Reed Hastings, during the company’s earnings call with Wall Street analysts, said the show only had a “gentle impact” on subscriber growth during Q1, according to The Hollywood Reporter.
That doesn’t mean that non-Netflix members who signed up for the service to watch House of Cards cut and ran after bingeing through the 13 episodes. Netflix, in a letter to shareholders, said: “Some investors worried that House of Cards would take advantage of our free trial, watch the show, and cancel. However, there was very little free-trial gaming — less than 8,000 people did this — out of millions of free trials in the quarter.”
Overall, Netflix is pretty confident in its ability to attract and retain subscribers with its original programming slate, which in addition to House of Cards includes the recently launched Hemlock Grove (from Eli Roth) and upcoming shows Turbo F.A.S.T. (in collaboration with DreamWorks Animation) and Sense8 (from the Wachowskis). In the same letter to shareholders, Netflix said: “Long term we believe the value of our Original series in driving acquisition and retention improvements will be borne out as we add more seasons of popular shows like House of Cards and further series. Harry Potter was not a phenomenon in book one, compared to later books in the series.”
Clearly the company is serious about the investments it plans to make in original programming.
In the letter to shareholders, Netflix reiterated the focus towards shifting the company’s content strategy toward curation of exclusive programming rather than it’s current position as a hub for non-exclusive programming. To make a real push in the marketplace though, Netflix will have to replicate the flash success of programming like House of Cards, to merit further expansion of its original content output.
Hastings said as much during the conference call with analysts (via CNN Money): “In the next two years, it’s a modest increase … If that were wildly successful for us, as the first three shows have been, we could continue to expand to 20 or north, but that would be dependent on what happens the rest of this year.”
By that measure, Netflix is doing well. The company said Hemlock Grove’s global viewership surpassed House of Cards’ when comparing each show’s first weekend on Netflix. A few more of those and certainly Netflix shareholders will continue to see a rise.
Do you think Netflix can make a dent in the original online programming space? And how so or not? Share in the comments!