Netflix Records Subscriber Growth in Q4

LOS GATOS: Netflix reported a net subscriber gain of 610,000 at its U.S. streaming and DVD rental platform in the fourth quarter, almost recovering from the loss of 810,000 customers in Q3 following an unpopular price hike.

The company ended Q4 with 24.4 million subscribers in the U.S., a 25-percent gain on the year-ago period. It added 220,000 U.S. streaming customers in the period but lost 2.76 million DVD customers.

Discussing the company’s results in a letter to shareholders, CEO Reed Hastings and CFO David Wells said that the biggest long-term threat to Netflix is TV Everywhere, in particular HBO GO. "HBO has some great content, particularly their original series, but today for most people it is locked behind a linear interface, or at best, behind a DVR interface and in all cases tethered to a linear subscription plan," the letter stated. "As HBO GO grows and becomes the primary way that consumers experience HBO, it will become a much more effective competitor for viewing time."

The letter also looks at the progress Netflix has made internationally, where it shored up 380,000 net additions in Q4 to reach 1.86 million customers. Canada should become profitable for the company by Q3 of this year, the letter said. As for Latin America, the letter noted that the region "presents unique challenges relative to our other markets; namely, low device penetration, high piracy, varying preferences for subtitles, and relatively low credit card usage for ecommerce. We are quickly learning what content works best in the region, and are adjusting our content library accordingly." The letter adds, "We are committed to the region over the long-term, encouraged by the prospect of building a large, profitable business over time, just as DIRECTV has done."

Addressing the U.K. rollout, Hastings and Wells cited Sky Go has Netflix’s biggest long-term competitor. "We believe we will compete very effectively against Sky Go, given our advantages of being an unbundled low-priced offering with broad content that is purely on-demand, and personalized. Over the coming years, we hope to be able to grow large enough to outbid Sky for one or more major studio output deals, as we did this year for MGM."

Q4 revenues at Netflix were $875.6 million, delivering a net profit of $40.7 million.