Netflix's 4Q restores company's investment luster

Published on NewsOK Modified: January 23, 2013 at 7:46 pm •  Published: January 23, 2013
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Netflix also still has 8.2 million customers signed up for the DVD-by-mail rental plans that launched the company's early success. Although Netflix is phasing out the disc service, the company hung on to more of the DVD subscribers than it anticipated during the fourth quarter. Netflix lost 382,000 DVD subscribers during the quarter.

Netflix seems confident it will build upon its recent momentum in the current quarter, which will be highlighted by the Feb. 1 debut of a much-anticipated TV series called "House of Cards." The series is produced exclusively for the video streaming service and stars Academy Award-winning actor Kevin Spacey.

In his letter, Hastings described "House of Cards" ''as a defining moment in the development of Internet TV." Netflix is releasing all 13 episodes of the first season simultaneously on the hunch that the added convenience will foster more subscriber loyalty instead of encouraging people to sign up for the service for just a month or two to watch exclusive series such as "House of Cards."

The company, which is based in Los Gatos, Calif., forecast that its video streaming service will pick up 1.35 million to 2.1 million in the U.S. during the first three months of this year.

Netflix also expects to break even or generate another profit during the quarter. Analysts previously thought the company would lose money to start the year as expenses for the international expansion and video-licensing fees outpace revenue growth.

Although he applauded Netflix's fourth-quarter performance, Pachter still believes Netflix's rising bills to license video will hobble the company.

"I think the company is genuinely mistaken in how it thinks it is going to manage content costs," Pachter said. "This is truly a house of cards and it's going to come crashing down this year."

As of Dec. 31, Netflix owed $5.6 billion in licensing fees during the next five years, up from $5 billion through Sept. 30. In an indication that he believes Netflix can shoulder the financial load, Hastings told analysts Wednesday that he is interested in licensing Sony Corp.'s' latest movies in a deal similar to the one recently struck with Disney. Sony currently has a licensing agreement with the Starz pay-TV channel that ends in 2015.

Netflix earned nearly $8 million, or 13 cents per share, in the fourth quarter. That was a 78 percent plunge from net income of $35.2 million, or 64 cents per share, at the same time last year.

Taking their cue from Netflix's own projections in October, analysts polled by FactSet had predicted the company's would lose 12 cents per share, also because of expenses for expansion and licensing.

Revenue climbed 8 percent from the previous year to $945 million, about $10 million above expectations.

For the full year, earned $17 million, or 29 cents per share, on revenue of $3.6 billion. Netflix had started the year warning it might sustain an annual loss for the first time in a decade. The company earned $226 million, or $4.16 per share, on revenue of $3.2 billion in 2011.