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Netflix Remains Unfazed by Growing Competition

Netflix continues to be unfazed by the increasing number of companies that are competing against it, including virtual multichannel video programming distributors (VMVPDs) and Amazon, according to a Netflix letter to shareholders and comments made by its executives April 17 in an earnings interview webcast for the company’s first quarter (ended March 31).

“We believe VMVPDs will likely be more directly competitive to existing MVPD services since they offer a subset of the same channels at $30-$60 per month, and may appeal to a segment of the population that doesn’t subscribe to a pay TV bundle,” Netflix said in its letter to shareholders. “But we don’t think it will have much of an impact on us as Netflix is largely complementary to pay TV packages,” it said, identifying Sling TV, Sony’s PlayStation Vue, DirecTV Now, YouTube TV and Hulu’s upcoming service as the most obvious examples of VMVPDs.

Netflix added: “Our focus also is on on-demand, commercial free viewing rather than live, ad-supported programming. Additionally, investors ask us about Amazon’s move into NFL football. That is not a strategy that we think is smart for us since we believe we can earn more viewing and satisfaction from spending that money on movies and TV shows.”

Netflix executives elaborated on their thoughts about Amazon on the earnings interview webcast. Amazon is “doing great programming and they’ll continue to do that,” Netflix CEO Reed Hastings told analysts. “But I’m not sure it will really affect us very much because the market is just so vast,” he said, comparing the situation to the rivalry between Netflix and HBO in which both companies have continued to gain subscribers.

Shares in Netflix were down 2.82% at $143.10 in afternoon trading April 18, after reporting first-quarter results that were slightly better than analysts had expected. Revenue grew to $2.64 billion from $1.96 billion a year earlier. Of the revenue reported, the vast majority — $2.52 billion – came from streaming subscriptions. Profit soared to $178 million (40 cents a share) from $28 million (6 cents a share).

Netflix added about 5 million members in the quarter, including 1.42 million in the U.S. and 3.53 million in other regions, it said. That boosted total streaming subscribers to 98.75 million (94.36 million of them paying members), including 50.85 million in the U.S. (49.38 million paying) and 47.89 million in other regions (44.99 million paying), it said.

The first-quarter membership additions were slightly weaker than Wedbush Securities analyst Michael Pachter expected, he said in a research note April 18. But the 600,000 U.S. members and 2.6 million members in other regions that Netflix projected it will add in the second quarter were more than Pachter estimated, he said.

Among other details pointed out by Netflix in its letter to shareholders were that it’s “seeing a small but steady migration” to its high-end subscription plan that includes 4 streams and “4K-UHD-HDR video quality,” and that it boosted investments in stand-up comedy content. The latter “can help grow our business, like our original series,” it said, adding that early results for its stand-up comedy offerings have been “promising,” including “Dave Chappelle: Collection 1,” which has become its most-watched comedy special to date.

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