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Analysts predict a disappointing second-quarter due to the additional spending Netflix has had to do in order to increase and maintain a broad archive of content for consumers

Netflix has released its Q1 results as well as the predicted outlook of the current quarter, which disappointed investors.

Netflix, an on-demand video streaming and video rental-by-mail company that launched its subscription service in 1999, has grown by leaps and bounds over the years. Netflix has put fear into Hollywood executives who believe the company is growing too large too fast, and has pushed Blockbuster into bankruptcy. It may even acquire original programming

Now, Netflix has released its first-quarter results, which showed an increase in revenue and higher gross margins. Profit skyrocketed from $32.3 million (59 cents a share) last year to $60.2 million ($1.11 a share) in the quarter ended March 31 of this year. Also, revenue increased 46 percent to $718.6 million, and the number of U.S. subscribers increased 63 percent from one year ago to 22.8 million today. Netflix has 23.6 million subscribers worldwide, which is a 69 percent increase from last year. 

In addition, gross margin widened from 37.8 percent to 39 percent.

Despite excellent Q1 results, analysts predict a disappointing second-quarter due to the additional spending Netflix has had to do in order to increase and maintain a broad archive of content for consumers. 

Netflix partially blamed the predicted Q2 results on the licenses it needs to stream movies over the web. 

"No one knows what to make of it," said Michael Pachter, a Wedbush analyst. "For the first time, they're talking about the streaming content costs growing dramatically, and now it's reflected in their guidance for the quarter." 

Pachter hopes Netflix will be "more transparent about its streaming costs."

Netflix shares fell 5.3 percent to $238.38 after the video streaming and rental giant announced that it expected per share to be between 93 cents and $1.15 in its second quarter. 

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Glad to see they are going to get more content
By Varun on 4/26/2011 4:37:16 PM , Rating: 2
I just signed up for the free month in Canada, and to me Netflix is great but has two major issues:
1. There is very little new content (almost zero new movies)
2. There is no 5.1 surround on the PC or Xbox 360. Maybe Silverlight 5 will bring this.

Just happy to see that they want to spend more on content - that is the thing they need to increase their userbase.

RE: Glad to see they are going to get more content
By Iaiken on 4/26/2011 4:51:31 PM , Rating: 3
I've used Netflix both in the US and Canada. The lack of streaming content in Canada is because they aren't automatically entitled to show movies for which they have license to in the states. Instead, they must basically renegotiate their entire library for redistribution in Canada.

This has also had the interesting affect of there being some content available in Canada that isn't available in the US (yet).

By Hiawa23 on 4/27/2011 7:02:15 PM , Rating: 2
I love Netflix. I really don't get all the complaining about the streamin selection, as what I don't get by streamin, they send me the bluray or DVD. I am sure they could offer more newer movies of instant streamin if you wanted to pay more, but as is, I have loved the service & I have been a subscriber since atleast 2004.

By callmeroy on 4/27/2011 8:40:43 AM , Rating: 2
Yep. I'm a Netflix subscriber -- I have the service on my blu-ray player. I used it alot two weekends ago all day was just netflix movies.

But there are three main things that I don't like with Netflix:

1. I don't care what anyone says even their HD movies do NOT deliver proper or "true" surround sound. Any time I've ever streamed a movie marked as "HD" from Netflix I notice the surround sound isn't there like if I watch a blu-ray, HD on one of my HD channels or even if I stream something from Vudu (those reasons also tell me its not my setup or equipment either).

2. This ties into #1 a bit -- just the lack of HD content. If I'd have to make up what % of their content is in HD I'd have to say its at *BEST* worse its about 20-25%. That's very disappointing as its 2011, a time when HD tvs is more the norm than the exception for most people, fast broadband internet and blu-rays are also the "norm" in most having a streaming service NOT be dominant with HD content is a bit ridiculous.

3. QUALITY new content. Sure every week I see something new in my Netflix menu but most of it are movies that stink or are no-name actors. How about some "REAL" movies that when they were out they were highly rated in the theatres. I'd love to see some actual "new movies" (as in releases no MORE than 4 years old) but I now that's super costly for them.

So with my griping why do I keep subscribing? Well they do have content I enjoy -- I like stand up and I have a few standup specials saved in my "instant queue"....they also have a dozen or so movies I like very much they are also saved forever in my "instant queue"....for just about $10 a month (with taxes)....its cheap and perfect to have something to watch on "blah days" at your finger tips.

the problem with businesses
By Dr of crap on 4/27/2011 8:38:21 AM , Rating: 4
This is the problem with business. Since when is it bad news to invest in yourself so that your future will be better. The past many years business have stopped focusing on the 10 year plan and need to make the 2 year or one year plan or the stock will suffer.
Thank you day traders!

Since when is it BAD to make a profit every year? Yet if that profit isn't high enough it is looked at as failure in the eyes of the stock holder. And if you're not making over 10% year over year it's also bad!

Business is so messed up by this and the employees suffer from it as well.

RE: the problem with businesses
By callmeroy on 4/27/2011 8:59:28 AM , Rating: 2
Spot on...but from the few friends and friends of friends that I know that hold higher places in small to medium companies at least..

It seems its mostly fodder for the media so they have something to talk/complain/whine about....

The companies themselves do NOT worry about it half as much as the "news" stories make it seem...

Profit is profit. Plain and simple. Especially in a down economy.

More over ANY profit gain (even just 2%) from the previous quarter or year is still a GAIN....

BUT the media seems to want sensational stories all the time having been spoiled by reporting on the mega profit companies like Apple (or hey have any of you checked out Exxon's profit lately....they are a BEAST....)....

In the end I think its ridiculous....leave a company alone for crying out loud -- as long as they are turning a profit, NOT getting government assistance to stay afloat AND obviously they have a customer base that enjoys their service or product....why should we care if they aren't turning 10000% profit gains every quarter?

By Skywalker123 on 5/1/2011 9:25:22 AM , Rating: 2
What do day traders have to do with anything? CEO's don't try to shore up stock prices for the benefit of day traders

By kleinma on 4/26/2011 4:43:48 PM , Rating: 2
Maybe I am missing something, but if the stock is at $238 right now, they are expecting it to be between .93 and 1.15 in the second quarter???? That is one hell of a stock crash

RE: hmmm
By enlil242 on 4/26/2011 4:51:25 PM , Rating: 2
That is earnings per share... Earnings / No. of shares. This quarter was $1.11 per share. They are expecting between $.93 - $1.15.

RE: hmmm
By kleinma on 4/26/2011 4:58:36 PM , Rating: 2
makes sense.. would be nice if the article was as explicit as your response was ;)

Wish Netflix stream live sports
By HrilL on 4/26/2011 7:25:43 PM , Rating: 2
It would be really awesome if they got a license for ESPN or something so they could do live sports streams. Maybe one day I suppose since I guess the rights to stream some sports is in the billions.

By cplusplus on 4/27/2011 9:54:18 AM , Rating: 2
ESPN already does this themselves. Why would they want to give that up to Netflix?

"This is from the It's a science website." -- Rush Limbaugh
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