Netflix Added 10 Million Global Streaming Subs in 2012

LOS GATOS: Netflix has released its Q4 2012 results, which show that the company generated profits for the year, despite its large international investments, and that it grew to more than 33 million global streaming members, having added nearly 10 million to its base in 2012 alone.

In the U.S., Netflix gained more than 2 million members in Q4, ending the year with more than 27 million domestic members. A major kudos on the domestic front is that the company scored the exclusive pay window for theatrical releases from the Walt Disney Studio starting in 2016. The company did acknowledge that competition is increasing in the U.S. market, as TV Everywhere services like HBO GO continue to improve. It also cited competition from Amazon Prime, Redbox Instant and Hulu. However, after comparing the 100 most popular movies and 100 most popular TV shows on Netflix with what is available on these other services, the company concluded that "when it comes to the most popular content with members on Netflix, none of these services are good substitutes to Netflix."

During the quarter, Netflix grew to more than 6 million international members. Its international loss of $105 million in Q4 was higher than the prior quarter international loss of $92 million, mostly from the launch in the Nordic countries. The company says that it expects its losses to decline though in international markets, as member growth exceeds growth in content spending.

A huge bright spot in the report was Netflix’s original programming. "We believe that February 1st will be a defining moment in the development of Internet TV," the report states. On that day, Netflix will release all 13 episodes of House of Cards. "We believe original series developed for Internet TV will be better for creators, better for consumers, and better for Netflix. A large on-demand service has fundamental advantages in producing and launching new series." House of Cards will be followed by Hemlock Grove on April 19, the fourth season of Arrested Development in May, Orange is the New Black, Ricky Gervais’s Derek and season two of Lilyhammer later this year. "If we are successful with our originals, we will produce content with comparable cost per viewing hour to other exclusive premium content. Success with originals will also enhance the global reputation of Netflix as a source of unique must-view content."

Netflix acknowledged that its DVD membership has been declining, though by less than it had anticipated. The U.S. DVD segment delivered $128 million.

Consolidated Q4 net income was $8 million. Net income was flat quarter over quarter, as the gains at the U.S. streaming division more than offset the declines of the DVD unit and the losses in international. Global operating expenses were flat. "We anticipate net income will be relatively flat quarter over quarter in Q1, as improvements in both domestic and international streaming profits will be offset by a decline in DVD contribution profit and increases in global operating expenses."