Netflix Inc. (NFLX), the dominant subscription video-streaming service, rose to its highest since August 2011 after saying its revival of the cult TV show “Arrested Development” could help second-quarter results.
The exclusive program, which becomes available starting May 26 after it was dropped by the Fox network, “might have an impact” on the company’s financial performance, Chief Financial Officer David Wells said at a JPMorgan Chase & Co. conference in Boston today.
Chief Executive Officer Reed Hastings has positioned Netflix as the undisputed leader in online video, recovering momentum he lost two years ago after pricing and product missteps, by adding original shows and exclusive studio deals. The company aims to widen its gross margin, the percentage of sales remaining after product costs, by an average of 100 basis points quarterly, Wells also said today.
Netflix is reviving “Arrested Development,” the comedy show that was canceled by Fox in 2006, as it bets on original programming to fend off competitors like Amazon.com Inc. (AMZN)
“We’re excited about it, but it’s a bit of a wild card,” Wells said of the new series.
The company’s service accounted for almost a third of tablet-video viewing in the U.S. in March, according to researcher NPD Group Inc. Netflix dominates online viewing through home networks in North America, accounting for 32.3 percent of prime-time Internet traffic, Sandvine Inc., a network services and research company, said in a report yesterday.
Netflix finished the first quarter ending in March with 29.2 million domestic subscribers. In April, the company forecast new U.S. subscribers would increase by as much as 880,000 in the current quarter. The period is typically slower for U.S. subscriber sign-ups, Wells said.
The company charges $7.99 a month for its mix of TV reruns, old movies and original shows, with a policy that lets family and friends share one account. As many as 10 million people watch the service without paying, by sharing passwords, Michael Pachter, a Wedbush Securities analyst in Los Angeles, has estimated.
Analysts have suggested Netflix might start offering a new range of plans, including individual accounts, surcharges for additional users or some combination, to increase revenue and margins.
“Our observation and our view is that password sharing is not as large as has been floated out there,” Wells said today.
Netflix in the current quarter forecasts net profit of $14 million to $29 million, or 23 cents to 48 cents a share. That compares with analysts’ projections of 38 cents a share, the average of 25 estimates.
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