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Netflix Q1 subscriber growth falls short of expectations

CEO Reed Hastings throws down gauntlet to theatre owners over Bright release.

Netflix beat earnings expectations as it announced Q1 results on Monday, although subscriber growth lagged behind.

Net income grew year-on-year from $27.7m to $178.2m, revenues vaulted 35% to $2.64bn, and earnings reached 40 cents a share.

However the service added fewer new members than anticipated: 3.53m international streaming subscribers and 1.42m US streaming subscribers.

Netflix had expected to add 5m global subscribers. The worldwide total stands at 98.75m.

In a note to shareholders, CEO Reed Hastings threw down the gauntlet to theatre owners.

“We are also open to supporting the large theatre chains, such as AMC and Regal in the US, if they want to offer our films, such as our upcoming Will Smith film Bright, in theatres simultaneous to Netflix,” Hastings said. “Let consumers choose.”

Hastings said the company anticipated “better economics relative to licensing movies under traditional windowing”.

The executive said that Siege Of Jadotville and Adam Sandler’s Sandy Wexler had been successful in this way, although Netflix never releases verifiable data or success metrics that can be analysed by outsiders.

Crouching Tiger Hidden Dragon: Sword Of Destiny, he added, had not been successful.

Netflix plans to spend more than $1bn on marketing in 2017 in support of what it said last year will amount to a $6bn buying spree this year.

The cost of acquiring and investing in so much content means the company lost $423m in free cash flow in the first quarter, a 62% increase on the period last year. This amount has troubled some analysts.

Hastings also dismissed the prospect of streaming sport, an area Amazon Prime is moving into, and said stand-up comedy worked well on its platform.

He said Dave Chappelle: Collection 1 was the platform’s most viewed comedy special ever, and described Gad Elmaleh’s Gad Gone Wild in the first quarter in France as a breakout.

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