Netflix Reports Jump in Q4 Profits; Adds 4.3 Million Subscribers

In its quarterly report, Netflix said it added 4.3 million subscribers in the past quarter and 13 million for the year.

"We expect to end the first quarter of 2015 with 61.4 million global members. Internet TV is growing globally, and Netflix is leading the charge," a letter to shareholders accompanying Netflix quarterly results said.

Netflix shares surged some 13 percent in after-hours trading on the results, which beat most analyst forecasts.

The company said its net profit jumped to $83 million (roughly Rs. 512 crores) compared with $48 million (roughly Rs. 296 crores) in the same period last year, and $59 million (roughly Rs. 364 crores) in the prior quarter.

Revenue hit $1.3 billion (roughly Rs. 8,024 crores) in the quarter compared with $962 million (roughly Rs. 5,938 crores) a year ago

But the California-based firm said it expects profits to slip in the current quarter as it makes investments for global expansion. The projection calls for profits to shrink to $37 million (roughly Rs. 228 crores) on revenues of nearly $1.4 billion (roughly Rs. 8,641 crores).

The company had aimed, in the past several years, "to expand as fast as we can while staying profitable on a global basis," said the letter to shareholders from chairman and chief executive Reed Hastings and chief finance officer David Wells.

"Progress has been so strong that we now believe we can complete our global expansion over the next two years, while staying profitable, which is earlier than we expected. We then intend to generate material global profits from 2017 onwards."

Netflix is currently operating in 50 countries and, over time, expects to be available in 200 markets, according to the statement.

In the current quarter, Netflix plans to launch in Australia and New Zealand and is "exploring options" in China.

"It is increasingly clear that virtually all entertainment video will be Internet video in the future," the letter said.

The international expansion "is largely made possible by the tremendous growth of the Internet in general, including on phones, tablets and smart TVs. We intend to stick to our core ad-free subscription model."

Netflix has seen strong growth, but is also facing competition from rivals such as Amazon and Hulu in streaming. Additionally, CBS and Time Warner unit HBO have announced plans for standalone streaming services, eliminating the need for a cable or satellite subscription.

"The company faces a more competitive environment than at any point in its history," said Paul Verna, analyst at the research firm eMarketer.

"Digital viewership of full-length TV shows and movies is on an upward trajectory, but that viewing is now fragmented across a number of services."

Amazon and Netflix both walked away this month with Golden Globe awards, underscoring the new original programming from the groups. Amazon this week also announced it would begin to produce original films for theatrical release, which would be available online within weeks afterward.