Netflix Q1 2006 Profit & More

Netflix announced Q1 2006 results (press release):

Netflix posted a first-ever Q1 profit of $4.4 million on $224.1 million in revenue, a 47% increase over the same period last year.

Subscriber acquisition costs declined slightly to $38.47.

Churn declined to 4.1% (a historic Q1 low), compared to 5.0% for Q1 2005.

Netflix ended the quarter with 4.866 million subscribers, a 61% increase over Q1 2005 (more than 700,000 additional subscribers).

They are forecasting 5.1 to 5.3 million subscribers in Q2, and 6.3 million by the end of the year.

Notes from the Q1 2006 investor conference call:

Hastings regrets not spending $2 million more on marketing, delivering even higher subscriber growth due to the strategic value of new customers.

Surprising household penetration numbers: Menlo Park, California: 22% and Jamaica Plains, Boston: 19%. Growth in high-penetration communities actually accelerates due to word of mouth.

Netflix will pass 5 million subscribers this quarter.

Hastings says they expect a slowdown in DVD purchases due to the launch of HD DVD. They believe that DVD rentals won't be affected.

The DVD format war will continue for several years, and it will hurt consumer adaptation of the new players. Netflix hopes that the studios will support both formats.

"HD movie access is free -- for now."

By the end of this year Netflix will communicate a clear timeframe for download delivery of movies for Netflix subscribers.

Blockbuster added 200k net subscribers in Q1, and with Netflix's 700k adds, a total of 900k customers moved to online services.

The cost of the patent lawsuit is included in the guidance, and it will probably take several years to litigate.

The business is growing faster than expected: Netflix raised guidance 4 times last year, and twice already this year.

Netflix is focused on the U.S. market and has no near-term plans to launch in the U.K. or elsewhere.

The Internet Stock Blog has posted a transcript of the call.

Comments

[gir]

Hey, a transcript. I wish people would do that more often. I don't know that I'll have time to go through the transcript, but I definately know I'm not going to have time to listen to the entire call.

Interesting that churn is down. The article on throttling was published 1st quarter, wasn't it? I would have expected a minor jump in churn (I'm assuming that more cancellations would manifest as a higher churn percentage).

[Aron]

It should be said that 200k is what Netflix said BB added in online subs. I suspect its half a taunt to get them to actually report the number, something they rarely do with any precision.

If BB Online actually got only 200k after all the advertising they've done, it's game over.