Netflix topped expectations with its first quarter revenue report this year, earning $1 billion in quarterly revenue and surpassing HBO’s user base with 29.2 million subscribers. Though HBO does not publish customer data, the research firm SNL Kagan estimated that the cable channel had 28.7 million subscribers at the end of 2012. As the New York Times pointed out, Netflix is on track to meeting chief content officer Ted Sarandos’ goal “to become HBO faster than HBO can become us.”
The video streaming company is defying analyst critiques of unsustainability as it accelerates its user base through original programming. It gained 2 million subscribers this last quarter, beating analysts expectations of 1.7 million. Globally, it gained 3 million streaming subscribers. The company released the original series “House of Clouds” in February to critical acclaim. Its second original release, a horror series from Eli Roth titled “Hemlock Grove,” had more viewers its first weekend than “House of Cards” and is particularly popular with young adults. Netflix plans to release a third series, a revival of the Fox sitcom, “Arrested Development,” this Memorial Day weekend.
“The global viewing and high level of engagement with the show increased our confidence in our ability to pick shows Netflix members will embrace and to pick partners skilled at delivering a great series,” the company explained in a letter to shareholders explaining the quarterly results. “The high level of viewer satisfaction implies we are able to target the right audience without the benefit of existing broadcast or cable viewing data and the strong viewing across all our markets gives us faith in our ability to create global content brands in a cost effective, efficient way.”
Netflix stocked jump 6.73 percent to $174.37 on Monday’s release of the quarterly report, and then surged another 20 percent in afterhours trading.
Netflix’s practice of posting all episodes in an original series online had drawn concerns that consumers would sign up only temporarily to watch their preferred content and then unsubscribe. This does not appear to be the case. Only 8,000 customers accepted Netflix’s free trial to watch “House of Cards” and then canceled their subscriptions.
Netflix also announced a new subscriber option designed for large households and families. Whereas the existing service costs $7.99 per month and allows two devices to stream, the company will soon launch an option to allow four streaming devices for $11.99.
Netflix’s profit for this quarter was actually diluted due to a $16 million loss on “extinguishing of debt” related to a February refinancing. Earnings had expected to be 20 cents per a share, but were actually 5 cents. That’s still much better than the company did a year earlier, when it posted a loss of $5 million, or 8 cents a share, for the same quarter last year.