Posted Tue Apr 23, 2013 at 09:00 AM PDT by Brian Hoss
$100 million 'House of Cards' gamble pays big dividends.
Netflix is scoring on all fronts today as the company announced the addition of 3 million subscribers in last quarter alone. That growth, when combined with the followed statement of the company's current strategy has sent the stock soaring, "During the quarter, we continued to grow members and revenue faster than content spending and our domestic streaming contribution margin increased 20 percent."
Investors had feared that Netflix's plan to acquire the pricey 'House of Cards' would not pay off, especially with Netflix electing not to parcel out episodes over a traditionally lengthy period of time. The specific concern involved potential customers initiating free trials and then cancelling. In contrast, Netflix announced that out of the millions of new subscribers (2 million in the US, 1 million internationally) only 8,000 joined and then cancelled.
Likewise, Netflix addressed two concerns with a single stroke. The company introduced a $12 family that ups the current $8 two stream limit to four. While the company only expects one percent of customers to take advantage of the new plan, those families watching more than two streams at once now have a reasonable option, and investors impatient for Netflix to alter its $8 plan can take a breath.
At 29 million subscribers, Netflix edges the 28.7 million that HBO had at the end of last year. More importantly, analysts from Hastings foresee the potential market ceiling for Netflix to be far above a premium cable channel at 60 to 90 million customers.
Source: The Verge
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