Original programming helps Netflix earnings take off as subscribers soar

SAN JOSE, Calif. — Netflix’s earnings quadrupled as the Internet video subscription service’s lineup of original programming helped attract 1.3 million more U.S. subscribers during its latest quarter.

The July-September financial results announced Monday are the latest evidence of Netflix’s increasing popularity as the service’s video library expands to include exclusive, high-caliber shows. The strategy is getting rave reviews among investors whose adulation has quadrupled Netflix’s market value so far this year.

Netflix’s stock soared again Monday, rising $36.32, or more than 10 percent, to $391.31 in extended trading after the numbers came out. That sets up the shares to hit an all-time high for the third consecutive trading session on Tuesday.

Investors increasingly view Netflix as the leader in a technology upheaval that will redefine the entertainment landscape for decades to come. The Los Gatos, Calif., company is steadily winning new converts to an $8-per-month service that streams TV shows and movies to any device with an Internet connection. Some households are so enamored with Netflix that they are canceling more expensive subscriptions to cable- and satellite-TV services.

Netflix ended September with 31.1 million U.S. subscribers, eclipsing the estimated 29 million subscribers that HBO’s 41-year-old pay-TV channel is believed to have in the country.

HBO, which is owned by Time Warner Inc., still has a commanding lead globally with 114 million subscribers around the world.

Netflix Inc., in contrast, has 40.3 million subscribers worldwide after adding 1.44 million customers outside the U.S. in the July-September quarter. The company’s streaming service is available in 41 countries, and Netflix plans to enter another yet-to-be identified overseas market next year.

The third quarter covered a three-month stretch that featured the debut of two exclusive series. They were the critically acclaimed “Orange Is The New Black,” and “Derek,” which also got largely positive reviews. In a Monday letter reviewing the third quarter, Netflix predicted “Orange Is The New Black” will end this year as its most-watched piece of original programming yet, outstripping “House of Cards,” a hit released earlier this year that won three Emmy awards.

Netflix earned $32 million, or 52 cents per share, in the quarter. That compared with income of $7.7 million, or 13 cents per share, at the same time last year.

Analysts surveyed by FactSet had forecast earnings of 48 cents per share.

Revenue rose 22 percent from last year to $1.1 billion to match analyst projections.

Netflix expects to add another 2.5 million to 4.1 million subscribers worldwide in the current quarter ending in December, including an additional 1.6 million to 2.4 million in the U.S.

The lofty gains are starting to unnerve Netflix CEO Reed Hastings, who recalls the company’s stock increasing by nearly five-fold in 2003, only to plunge by 77 percent the following year as investors fretted about stiffening competition and higher expenses for a DVD-by-mail rental service that was once the company’s financial backbone. Hastings also watched the stock plummet by more than 80 percent from its highs reached in 2011 after Netflix imposed changes that raised its prices by as much as 60 percent.

“Every time I read a story about Netflix is the highest appreciating stock in the S&P 500 [index], it worries me because that is the exact headline that we used to see in 2003,” Hastings said during a Monday review of the latest quarter. “We have a sense of momentum investors driving the stock price more than we might normally.”

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