Netflix posts positive first quarter

CEO warns of growing competition from DVD-rental kiosks

Netflix blew past earnings expectations in the first quarter and raised its full-year profit and subscriber forecast, but CEO Reed Hastings said competition from DVD-rental kiosks is heating up.

Kiosks rent new releases for $1 a day, and Hastings said Thursday many of its customers who cancel their subscriptions cite the kiosks as the reason.

"By the end of the year, kiosks will likely be our No. 1 competitor as video stores fall inversely," he told analysts, adding that the cheap rentals kiosks provide are not good for the DVD industry.

He also said the new releases account for only about a third of Netflix's rentals, so kiosks can only compete with Netflix on a limited level.

"Our differentiators continue to be our vast selection, over 100,000 titles, the convenience of mail and streaming," he said.

Netflix posted a $22.4 million net profit in the quarter, up from $13.3 million a year ago, on revenue that increased 21% to $394.1 million.

The company ended the quarter with 10.3 million subscribers, up 10% from the fourth quarter last year and at the top end of guidance. It expects to add up to 300,000 more subs this quarter.

Netflix also said it would raise prices about 20% for subscribers who desire Blu-ray discs.

Hastings, as he often does, talked up streaming but said that, contrary to published speculation, he was not considering offering stream-only subscription plans yet.

Netflix shares fell 1% during the regular session to $45.32 and 7% in after-hours trading.
comments powered by Disqus