Finally some good news out of Neflix! The nation’s largest video subscription company, which alienated customers by raising prices last summer (among other perplexing business decisions) on Wednesday announced that its subscribers watched over 2 billion hours worth of streaming content in the last three months of the year.
“We were thrilled to deliver more than two billion hours of TV shows and movies across 45 countries in the fourth quarter,” said Netflix co-founder and CEO Reed Hastings in a press release. “Netflix delights members by giving them choice, convenience and control over the entertainment they love for an incredibly low price.”
Netflix used its announcement to remind investors and analysts about all the costly content deals it inked toward the end of 2011 — perhaps an effort to bolster its library in advance of the impending loss of Starz content (which includes all Disney and Sony Pictures movies) in February due to a contract dispute.
Further, Netflix highlighted its own forthcoming forays into original content, touting the coveted David Fincher-produced political drama series “House of Cards,” due out sometime this year starring Kevin Spacey, and “Lilyhammer,” a miniseries about a gangster set to premiere on February 6.
And yet — there was something unmistakably amiss about the announcement, at least according to longtime Netflix analyst and naysayer Michael Pachter of Wedbush Securities.
“It’s an odd release,” Pachter told TPM via email. “There was no question that Netflix members used the streaming service a lot (Reed Hastings said more than a billion hours expected this quarter), but this is just rubbing the content owners’ noses in the fact that Netflix pays” significantly less for its streaming rights than do other competitive services, including Amazon and Apple.
As Pachter put it, Netflix might have just shot itself in the foot again by releasing the numbers ahead of its fourth quarter earnings statement (due out later this month) and at a time when the company is seeing the rise of competitors, along with a crunch from content providers looking for more money as a necessary payback for their role in Netflix’s success.
“I think this announcement will backfire on Netflix, and will provide content owners with the ammunition they need to extract meaningfully higher rates out of Netflix,” Pachter explained to TPM. “The company may plead poverty, but the fact that they are pricing at $7.99 per month or $24 per quarter, and their average customer is watching 100 hours for $24 has to really upset the content owners. The average cable bill is $78 per month for around 133 hours of television.”
Asked about the results and their future implications on Netflix’s business, a Netflix spokesperson declined to comment, but did point out to TPM via email that the company announced listening hours for the previous quarter in order of 1 billion, and that Wednesday “was a good day to announce it,” to coincide with Netflix’s announcement a day prior of the release of “Lilyhammer.”
The new two billion hours streamed figure indicates “Netflix members enjoy the convenience, selection and value of Netlfix,” the spokesperson told TPM.
Investors, for the first time in a while, seemed to agree, with Netflix stock closing up 11.36 percent at $80.45 on Wednesday, still far below its all-time high of $305 in July, as the Associated Press pointed out.
The real test will come in Netflix’s fourth quarter results and guidance for quarter one of 2012. Stay tuned.
