Netflix’s Sales Jump 46 Percent; Hopes To Fund More Original Programming

Netflix

All of the latest metrics on Netflix (NSDQ: NFLX) are up, up and up: The company has 23.6 million subscribers, up from 14 million a year ago. Revenue during its most recent quarter was $719 million, up 46 percent year-over-year. And earnings per share came in at $1.11, up 88 percent.

All of those numbers were slightly above Wall Street’s expectations, but the company is warning that it won’t be able to continue to grow at that torrid rate, saying that “while we expect our net (subscriber) adds the rest of this year to continue to exceed those of the prior year, it won’t be at a pace of nearly 2X like in Q1.”

Much of the company’s growth over the last year has come because Netflix has invested heavily in licensing content for online streaming, but CEO Reed Hastings minimizes the impact of that spending in his commentary, saying that “while the size of these deals and their impact on our P&L is often speculated about in the press, spending typically takes place over multiple years and the amortized cost of these deals is taken into consideration in our 14% target operating margin model.”

The company’s highest-profile licensing announcement during the quarter was an agreement to pay as much as $100 million to fund the development of House of Cards, a new TV show that will be available exclusively to Netflix subscribers.

Hastings says the move was “driven by a desire to test a new licensing model using a small portion of our content budget” and says it is not a shift in strategy towards original programming. He does say, however, that Netflix hopes to do “two or three similar, but smaller, deals so we can gain confidence that whatever results we achieve are repeatable.”

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