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Article updated: 4/23/2013 10:51 AM

Netflix subscriber gain tops estimates on 'House of Cards'

Netflix Inc., the leading online video-subscription service, posted a better-than-expected gain in U.S. subscribers for the first quarter, adding more than 2 million new customers. The stock soared.

Netflix Inc., the leading online video-subscription service, posted a better-than-expected gain in U.S. subscribers for the first quarter, adding more than 2 million new customers. The stock soared.

 
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By Bloomberg News

Netflix Inc., the leading online video-subscription service, posted a better-than-expected gain in U.S. subscribers for the first quarter, adding more than 2 million new customers. The stock soared.

The increase brought the domestic total for the period to 29.2 million, Los Gatos, California-based Netflix said today on its website. Analysts had estimated Netflix would end March with 29 million online U.S. users, the average of seven estimates compiled by Bloomberg.

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Shows such as the original political drama "House of Cards" with Kevin Spacey and Robin Wright helped attract new online subscribers in the U.S., beating the company's January forecast of 1.3 million to 2 million new signups. The company has been investing in original shows to bolster its library of films and TV reruns to stand out from competitors such as Amazon.com Inc., the largest Web retailer and Hulu LLC.

"The launch of 'House of Cards' provided a halo effect on our entire service," Chairman and Chief Executive Officer Reed Hastings said in a letter to investors.

Netflix jumped 26 percent to $219 in extended trading after the release. The shares rose 6.7 percent to $174.37 at the close in New York and have gained 88 percent this year, second most among stocks in the S&P 500 after Best Buy Co.

First-quarter net income, including an expense for debt retirement, totaled $2.69 million, or 5 cents a share, compared with a loss of $4.6 million, or 8 cents, a year earlier. Sales rose 18 percent to $1.02 billion from $869.8 million a year ago, matching analysts' estimates of $1.02 billion.

Profit Forecast

This quarter, the company forecasts new U.S. subscribers to increase by as much as 880,000, reaching 29.4 million to 30.05 million, Hastings wrote.

The company forecasts profit of $14 million to $29 million, or 23 cents to 48 cents a share. That compares with analysts' projections of 30 cents, the average of 28 estimates.

The company said it would introduce a $11.99-a-month plan that lets users receive four different streams to Web-connected devices, Hastings said, adding he expects fewer than 1 percent of customers to upgrade.

Analysts had suggested Netflix might offer a range of plans, including individual accounts, surcharges for additional users or some combination, to increase revenue and margins. As many as 10 million people watch the online video service without paying, according to Michael Pachter, a Wedbush Securities analyst in Los Angeles.

Worldwide Users

The company gained 1.02 million international subscribers, reaching 7.14 million and contributing 14 percent of total sales. Netflix this month raised its subscription price in Brazil by 13 percent to 17 real to match local inflation, the statement said. The company also plans to start service in another European market in the second half, it said, without naming the territory.

Netflix began showing all 13 episodes of the horror series "Hemlock Grove" on April 19. On May 26, the revived comedy "Arrested Development" will debut.

The company also put all 13 episodes of "House of Cards" on its site at once. Hastings said fewer than 8,000 people took advantage of the company's free trial to watch the series and then canceled.

(Netflix plans a conference call at 6 p.m. New York time at http://ir.netflix.com/events.cfm.)

--Editors: Rob Golum, Ben Livesey

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzobloomberg.net

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