Netflix have posted results for the the first quarter of 2012, and they report a loss of $4.6 Million and also predict a slow-down in subscriber growth for the second quarter. The news resulted in Netflix stock dropping by over 16%.
The streaming subscription company reported revenue of $870 million during the first quarter, which shows a growth from last year when revenue was $789 million. But last year at the same point, they reported a profit of $68 million.
The loss is the first Netflix have experienced for seven years, but was expected after Netflix began an ambitious worldwide expansion costing around $103 million from the bottom line, and after the problems arising from last years price rise. And things could get worse as the company are forecasting the next quarter as between a $6 million loss and an $8 million gain.
Subscriber numbers grew to 26.5 million, with 23.41 million from the US, a rise of 1.74 million in the first three months of 2012. Outside the US, streaming subscribers rose by 1.21 million reaching a total of 3.07 million. U.S. DVD subscriptions dropped by more than 1 million to approx 10.1 million.
The DVD side of the business generated $146 million profits from $320 million revenue.Netflix are seeing a change from DVD rentals which are more profitable, to streaming which makes less. For the next quarter, US streaming subscribers are forecast to increase to between 23.6 million and 24.2 million, a rise of around 800,000, whilst the DVD numbers will fall to around 8.95 million.
So the streaming side will grow as DVD members fall. Analysts predict a rise of 781,000 online subscribers, while the DVD business will lose 623,000 customers this quarter.However Netflix say they expect streaming video’s profit margin to continue growing.
Speaking about the results in a joint letter, Netflix CEO, Reed Hastings, and the chief financial officer, David Wells, said they would return to global profitability in the second quarter saying, “Our rapid return to profitability, enabling further international expansion, is very gratifying.”
Talking about their foray into original content, Hastings said that the show, ‘Lilyhammer‘ was “quite successful based on the amount we invested.” The company has a growing slate of original content in the works, including the return of ‘Arrested Development‘ and political drama ‘House of Cards‘ which Hastings said is a “natural outcome of our becoming a cable network like any other.”