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As Netflix subscribers hit 65m, CEO says content quality and prices are on the up too

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This followed results for the second quarter of 2015 that were better than expected, as subscribers climbed to 65m worldwide.

The additional subscribers totalled a third more than projected, rising around 94 per cent year-on-year to about 3.3m for the second quarter – ahead of the company’s forecast of 2.5m.

The streaming service now has a bigger population than the UK – which sits at 64.6m according to ONS. Of the subscribers, 42m are in the US. This increase helped lift Netflix’s shares more than ten per cent in after-hours trading to around $107.

Netflix also reported a six cent per share profit, which fell short of the 16 cents EPS the company posted in the same quarter a year ago. Revenue for the second quarter was $1.48bn – compared to $1.22bn last year.

Hastings said a strong launch in Australia and the popularity of Netflix’s Spanish language content with subscribers had been key contributors to the successful results. The company has aggressive expansion plans for the foreseeable future – aiming to reach 200 countries, including China, by the end of 2016.

He also expressed reluctance to celebrate the results too extensively, saying increased attention would make him “cautious”. The company has told investors it doesn’t expect to break even globally until the close of 2016. There had been a falloff in net income which underscored the significant level of investment required to implement its push towards original programming and rapid expansion overseas.

The cost of the third-party content currently on the service remains 4.6 times its net revenue at $7.7bn.

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FBR Capital Markets analyst, Barton Crockett, said that currently, the future looks bright as the company is managing to attract interest through consistent content.

“Subscriber growth was huge domestically and internationally,” he said. “The technology, the breadth of content and the quality of content is really working in their favour”.

Hastings has outlined encouraging subscribers to move “up to the two-stream and the high-def and the ultra high-def” as a priority, though didn’t elaborate on what would be implemented to motivate people to do so.

While prices aren’t set to increase immediately, the chief executive acknowledged that there would be a gradual rise over the next decade.

“We want to take it very slow,” Hastings said. “Over the next decade I think we’ll be able to add more content and have more value and then price that appropriately.”

As a leader in the field of internet TV, Netflix has also become a vocal representative for the industry. The company recently announced its decision to support a big cable merger between Charter and Time Warner Cable, as the companies agreed to abide by settlement-free peering – so it wouldn’t charge content providers for distributing internet traffic.

Netflix had previously been embroiled in a battle with Comcast over paying extra charges, following this by opposing a prospective merger between Comcast and Time Warner Cable.

The latest pledge could establish a precedence that extends across the industry, which is what Hastings is hoping for. The spread of such agreements would spare Netflix, but also potentially the entire industry from “worrying about a tax from ISPs” as Hastings said.

Image: Shutterstock

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