Netflix sets Q4 subscription record

Shares rise 14% in after-hours trading

Netflix added 1.1 million customers to its ranks in the fourth quarter, a record for the 11-year-old company, and posted a 36% surge in profit, the company said Wednesday.

Netflix earned $30.9 million on revenue that climbed 24% to $445 million.

The company that invented the DVD-by-mail subscription business ended the fourth quarter with 12.3 million subscribers and said it expects to have as many as 16.3 million by the end of this year.

The unusually aggressive guidance and strong fourth-quarter numbers had Investors giddy on Wednesday, bidding shares 17% higher in after-hours trading after they closed 2% higher to $50.97 during the regular session.

By contrast, Netflix rival Blockbuster saw its shares fall 8% on Wednesday to 36 cents. Wall Street valued Blockbuster at $70 million on Wednesday and Netflix at $2.8 billion.

Netflix's impressive financial report also came the same day that reports surfaced in the Wall Street Journal that retailer Movie Gallery, as early as next week, was planning to file for bankruptcy for the second time in two years.

Ever the rebel, Netflix introduced a new wrinkle into the tradition of after-earnings conference calls: It skipped the usual CEO comments and CFO rundown of numbers and went straight to questions that analysts submitted by email.

Netflix CEO Reed Hastings said a deal with Warner Bros. that will delay Netflix's access to that studio's new-release DVDs by 28 days shouldn't hurt business.

Warners is looking for "a window to improve sell-through," he said, and he supports that effort.

He also said the typical consumer doesn't know whether a movie is available on DVD 90 days after its theatrical release or 120, nor does he seem to care very much.

"There are not high expectations of a perfect day when it is supposed to be out," he said.

Streaming also has become a big part of Netflix's business relatively suddenly, and Hastings predicted that two-thirds of the company's subscribers will be watching at least some of their movies that way by the middle of next year.

Netflix has deals for streaming movies to TV screens via Wii, PlayStation 3 and Xbox consoles as well as to some nongaming devices.
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