Original URL: http://www.theregister.co.uk/2013/04/23/netflix_results/

Make cool shows, make money: Netflix's SHOCKING TV strategy

'Internet TV' biz counts House of Cards gamble winnings

By Andrew Orlowski

Posted in Media, 23rd April 2013 13:04 GMT

Netflix added 2 million US subscribers and made a profit of $2.69m (£1.77m) in the first quarter of 2013, buoyed by its critically acclaimed exclusive drama House of Cards.

The DVDs-by-post company now bills itself as an “internet television network” and is edging up in US customer numbers - its subscribers now almost equal those of Time Warner giant HBO. Netflix spent a reported $100m creating House of Cards - a remake of a British political thriller first dramatised by the BBC in 1990, transported to Washington DC - with Kevin Spacey in the lead role, and David Fincher directing.

It wasn't cheap - the $100m apparently pays for just 26 episodes - but the gamble appears to be paying off. Netflix made all 13 episodes available at once, a bargain for £5.99. The gamble was that the investment would attract users and increase loyalty - and it seems to have worked.

Netflix reported revenue of $1bn for Q1 2013, adding 2 million subscribers to reach a total of 29.2 million. In comparison, premium channel HBO had 28.7 million customers at the end of last year. While the profit was wafer-thin - just under $3m - revenue grew faster than at any time since the switch away from posting out DVDs: $55m higher, quarter-on-quarter. And Netflix said revenue is rising faster than content spending - the crucial metric.

Naturally some tightwads tried to game the system - by signing up to a month's free subscription, gorging on House of Cards, and then cancelling. But fewer than 8,000 actually engaged in this "free-trial gaming", said Netflix.

The company says it is introducing a $12-a-month family plan, allowing four concurrent streams per account. At present only two devices can receive streams at the same time.

The splashy drama does rather disguise the absence of first-run movies - although it provides neighbours of Harry Enfield's "Box Set Man" with a less smug alternative.

"We only watch box sets"

Netflix was castigated by the Twitterati for hiking prices in 2011 - but who's laughing now? Revenue is up 18 per cent annually, and more original drama is planned.

Netflix uses cloud infrastructure owned by Amazon, which operates arch rival LoveFilm. ®