Netflix's transition from a DVD distributor to a streaming content provider hit a notable milestone---55 percent of its nearly 14 million subscribers are now watching movies and TV via the Internet.
To put that streaming media figure into perspective, Netflix said that 48 percent of its subscribers watched more than 15 minutes of content in the fourth quarter. A year ago, 36 percent of subscribers watched streaming movies or TV episodes.
The company delivered the typically strong quarter as it ended the three months ended March 31 with 13,967,000 total subscribers, up 35 percent from a year ago. Netflix reported first quarter earnings of $32.3 million, or 59 cents a share, on revenue of $493.7 million, up 25 percent from a year ago. Earnings were 5 cents a share better than Wall Street targets. Revenue was in line with estimates.
Gross margin in the first quarter also improved to 37.8 percent, up from 34.2 percent a year ago. Meanwhile, the costs to acquire a customer---$21.54 per gross subscriber addition---was better than the $25.79 mark a year ago. Netflix also said that first quarter churn was 3.8 percent, down slightly from the fourth quarter.
As for the outlook, Netflix outlined the following for the second quarter:
- Subscribers of 14.7 million to 15.0 million;
- Revenue of $517 million to $525 million;
- Earnings of 62 cents a share to 73 cents a share.
Wall Street was expecting earnings of 68 cents a share on revenue of $516 million.
For 2010, Netflix projected:
- Subscribers of 16.5 million to 17.3 million, up from 15.5 million to 16.3 million previously;
- Revenue of $2.11 billion to $2.16 billion, up from $2.05 billion to $2.11 billion;
- Earnings of $2.41 to $2.63 a share, up from $2.28 to $2.50 per share.
Wall Street was expecting earnings of $2.51 a share on revenue of $2.1 billion.
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