Netflix stock surges on solid subscriber growth

mgn online
Tuesday, April 23, 2013 - 7:00am

Netflix's original programming bet seems to be paying off.

Netflix signed up 2.03 million new U.S. streaming subscribers in the first quarter, which was at the top end of the company's own predictions. The first quarter included the launch of the company's biggest original series to date: "House of Cards," starring Kevin Spacey.

The strong subscriber gains helped Netflix handily beat analysts' earnings estimates. Profits came in at 31 cents per share, while analysts polled by Thomson Reuters were expecting earnings of 20 cents per share.

Sales came in at $1.02 billion, in line with expectations.

Netflix shares soared 17% in after-hours trading following the company's earnings announcement.

The earnings report is investors' first look at Netflix's original content plan, which the company first announced in late 2011. Netflix is rolling out a long list of original series this year: a second season of "Lilyhammer," a new season of the canceled "Arrested Development," a new series from horror king Eli Roth, one from comedian Ricky Gervais and another from "Weeds" creator Jenji Kohan.

Analysts have expressed two big concerns about Netflix's approach. First, the company is releasing all episodes at once -- which means someone could sign up for a month to watch "House of Cards" and cancel right afterward.

The second worry is that original series can be costly -- "House of Cards" reportedly cost $100 million for two seasons.

But Netflix spokesman Joris Evers told CNNMoney earlier this year that the company spent about the same amount on "House of Cards" as it would have on an exclusive streaming deal with an outside studio.

Those studios have demanded more for their valuable content over the past two years, as they can now shop their shows around to Netflix rivals: Hulu, Redbox, Amazon and more. HBO (owned by CNNMoney parent company Time Warner) and CBS' Showtime are also expanding their streaming offerings.


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