The news was definitely of the mixed variety for Netflix (NFLX) today as they announced their fourth-quarter earnings. As expected they lost profit during the last quarter due to a mass exodus of subscribers unhappy about their new pricing model. However, despite profit declining over 13% when compared with the previous quarter, Netflix still pulled out ahead of industry expectations, earning $41 million, or 73 cents a share, on revenue of $876 million.
This news was music to investor’s ears, and stocks rose sharply as a result. However, Netflix isn’t out of the woods yet. The company recently announced a pricy UK expansion, which is expected to cut into next quarter’s profits sharply. Netflix is also trying to bolster relationships with streaming partners, and is expected to dole out an unprecedented amount of money to secure new content for its streaming service, which won’t come cheap for the tech giant.
Many have openly questioned Netflix’s decision to focus only on streaming content, as it presents many challenges in the form of licensing fees and placating fickle third-parties. Netflix is already losing licensing from Starz, which is a huge content provider, and ABC/Walt Disney seems keen to follow suit. As Netflix becomes more dependent on their streaming service, content providers will likely jack up rates, which will pu Netflix in a tight spot indeed.
For the time being though, Netflix is optimistic about their streaming service, and announced that its subscribers streamed more than 2 billion hours of movies and TV shows during the quarter. Clearly, investors are hoping this trend continues as Netlix forges ahead into an uncertain future.