LOS GATOS, Calif. – Video streamer (and in the States, DVD-mailer, too) Netflix continues to add hundreds of thousands of customers and tens of millions in revenue and profits, the company announced Monday.
It also continues to rail against the business practices of Canadian Internet service providers.
The company added 3.6 million subscribers in the quarter ended March 31, 2011 for a total of 23.6 million (800,000 of which are in Canada). Quarterly revenue grew to $706 million, up 43% over Q1 2010 while operating income grew 94% to $113 million.
The company noted several wins on the content side (at least in the States, as many of these content deals are not applicable in Canada, where our media companies currently own the rights).
“Our agreement with CBS is particularly notable, as Netflix is now the only online premium subscription service that offers shows from all four broadcast networks, as well as many of the largest cable TV networks,” reads the company’s note to shareholders.
“The arrangement includes only a few on-air shows at present, but provides the framework for future shows to appear on Netflix while immediately unlocking a broad selection of classic television episodes.
“The Fox deal guarantees all previous seasons’ episodes of the top rated show Glee and the F/X hit show Sons of Anarchy for years to come. This multi-year, non-exclusive, agreement ensures access to current and all future episodes. It is similar to a syndication deal, except that episodes are made available the season after they air, unlike typical syndication deals that do not begin until a show completes at least four seasons of broadcast. The first season of Glee and the first two seasons of Sons of Anarchy are now available to stream on Netflix,” reads the release.
“With Lionsgate, we obtained exclusive syndication rights for Mad Men. Beginning in July, the first four seasons of this award winning series will be available to stream, with new seasons appearing every year until the series is completed. For the first several years of our deal, those seasons will not be available to other broadcast or cable networks. Separately, we extended and made exclusive our current Lionsgate deals for the popular Showtime series Weeds and the Spike TV show Blue Mountain State.
“As streaming grows, TV shows and feature films are being enjoyed in nearly equivalent volume by our subscribers and our content acquisition team is focusing their attention accordingly.”
For now though, many of these shows are not available in Canada via Netflix.
As for its performance in Canada, the company admitted in the release it “slightly over-forecast” what subscriber additions would be in the quarter (it added 290,000 net new customers).
“During the quarter, we made great progress in increasing the quality and volume of content available to our Canadian subscribers. At the end of Q1 we began an output deal with Paramount, in which all of its movies will be available on Netflix streaming just a few months after DVD release,” reads the Netflix letter.
“In addition we licensed several popular TV series from Sony, including Breaking In, and Mad Love, and from Fox, including Prison Break, Firefly, Arrested Development, and Saving Grace. In Q2, we will continue to increase our content spending in Canada… (t)hen, after achieving profitability in Q3 in Canada, we will stay at approximately break-even in Canada for a few quarters in order to further strengthen the availability of our streaming content there.”
However, the release also went on to lambaste the “outrageously high” data charges Canadians are subjected to when it comes to their Internet service providers – about $1/gigabyte when they exceed their monthly plan caps.
“(W)e’ve recently changed the default setting for Canadian Netflix members to an encoding that consumes only 9 gigabytes for 30 hours of viewing versus 30 -70 gigabytes for 30 hours of viewing under our standard encoding. The video quality is slightly lower but still very enjoyable,” notes the release.
“As a side note, data caps are actually a very poor way to manage demand and limit Internet congestion,” reads the Netflix release. “All of the costs of supplying residential broadband are for supporting the peak loads, typically Sunday nights for residential customers. Bandwidth consumed off-peak is completely free; it literally has no marginal costs. If ISPs really wanted to limit their costs and congestion, they would limit speeds at peak times. But if their goal is instead to increase revenue, then making consumers pay $1 or more per gigabyte is an excellent strategy.
“Canadian consumers have been outspoken against the excessive charges they face, and hopefully Canadian ISPs will listen to them by raising the caps or abandoning them altogether.”
– Staff
