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Netflix Adds Record 4.9 Million Subscribers in Q1

Subscription VOD leader ends quarter with 62.3 million subs, cites original series as fueling better-than-expected U.S. growth

Netflix blew past subscriber-growth expectations for the first quarter of 2015, packing on 4.9 million new streaming customers in the period — a record for the company.

The company posted revenue in line with Wall Street’s revenue expectations, with $1.57 billion, but fell short on earnings at a reported 38 cents per share, with Netflix blaming the miss on unfavorable currency-exchange rates; analysts expected 69 cents per share. Netflix shares nevertheless jumped as much as 13% in after-hours trading Wednesday.

Netflix reported a net gain of 2.28 million U.S. subs and 2.6 million overseas, to end Q1 with 62.3 million streaming customers. In January, Netflix told investors it expected to add 4.05 million subscribers in the first quarter, with 1.8 million in the U.S. and 2.25 million internationally.

Netflix attributed the better-than-expected growth for Q1 in the U.S. to its expanding content lineup.

“We think strong U.S. growth benefited from our ever-improving content, including the launch of the third season of ‘House of Cards’ and new shows ‘Unbreakable Kimmy Schmidt’ and ‘Bloodline,'” CEO Reed Hastings and CFO David Wells wrote in a letter to shareholders. Netflix debuted “Marvel’s Daredevil” on April 10, after the end of the first quarter on March 31.

Netflix is forecasting Q2 2015 U.S. net adds of 600,000 — historically a weak period — similar to the year-earlier quarter. Internationally, the company projects adding 1.9 million subs, up 70% from Q2 2014. Netflix is aggressively expanding overseas, having launched in Australia and New Zealand on March 24 following a big push into Europe last fall.

In the first quarter, Netflix customers streamed 10 billion hours of video, which is “more evidence that consumers around the world are embracing the Internet TV revolution,” according to Hastings and Wells.

“Clearly, over the next 20 years, Internet TV is going to replace linear TV,” Hastings said on the company’s call with investors.

As for competition — notably, HBO’s launch of the standalone $15-per-month HBO Now service — Hastings and Wells said: “As we have said in the past, Netflix and HBO are not substitutes for one another given differing content. We think both will continue to be successful in the marketplace, as illustrated by the fact that HBO has continued to grow globally and domestically as we have rapidly grown over the past five years.”

Internet-delivered pay-TV services, like Dish Networks’ Sling TV and Sony’s PlayStation Vue, are “more competitive to the current pay-TV bundle than to Netflix, which is lower cost, has exclusive and original content, and is not focused on live television,” the execs said. They added: “Piracy remains a considerable long-term threat, mostly outside the U.S.”

Netflix said net income for Q1 was depressed by foreign-exchange rates; excluding those losses, Q1 earnings per share would have been 77 cents compared with actual EPS of 38 cents, according to the company.

Earlier Wednesday, Netflix said it picked up “Orange Is the New Black” for a fourth season, to premiere in 2016, and announced eight-part docu-series “Our Planet” — its biggest documentary project to date — from the creators of “Planet Earth,” slated to debut in 2019.

In Q2 2015, Netflix has set debuts for original series including season 3 of “Orange Is The New Black” (June 12); “Grace and Frankie,” starring Jane Fonda and Lily Tomlin (May 8); and “Sense8,” a dramatic thriller from the Wachowski siblings.

Netflix also disclosed plans to roll out an upgraded TV user interface in the second half of 2015. The enhancements “will bring video-playback forward into the browse experience,” Hastings and Wells said. “We are also developing improved ways to promote Netflix originals to our members, using our data to help identify which members would be most likely to enjoy each original title.”

In addition, the Netflix execs noted that it’s seeking shareholder approval for a stock split, which the company outlined in a regulatory filing last week. The proposal is on the table for a vote at the Netflix’s June 9 annual stockholders meeting.

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