Netflix added more new subscribers than expected, a quarter after the online streaming services company raised prices.
There's no plan to raise prices again right away. That will likely happen, but only when Netflix has earned it, company executives said Monday.
Netflix's value — the most popular plan currently costs $10.99 monthly, $13.99 gets you 4K video — really depends on how good the service is compared to its competition, said CEO Reed Hastings during an interview Monday after the company released its first-quarter financials. Those prices represent $1 and $2 price increases, instituted last fall.
Netflix's success depends on first getting consumers to subscribe to the service, Hastings says. "So you have to earn it first by doing spectacular content that everybody wants to see," he said in an interview with Morgan Stanley head of media research Ben Swinburne posted on YouTube.
"But if you do that, you can get people to pay a little bit more because then we are able to invest more and further improve," he said. "But we always approach it on a 'have we earned more viewing for people' basis first, rather than a price-first basis."
Subscribers continued to flock to the Los Gatos, Calif. company in the quarter, as Netflix added 7.41 million new subscribers, topping its own forecasts of 6.35 million -- and that of Wall Street. Netflix added 1.96 million new subscribers in the U.S. and 7.41 million internationally, increasing its total subscriber base to 125 million.
The secret? Viewers wanted to see new seasons of series such as Marvel's Jessica Jones, Grace and Frankie, Santa Clarita Diet, A Series of Unfortunate Events and the new sci-fi offering Altered Carbon. "We are continuing to invest in content, marketing, product, all the things we’ve been doing," Hastings said. "Just the breadth of content we have got going is really remarkable."
Netflix (NFLX) shares surged more than 5% in after-hours trading to $323.92. Shares have risen more than 22% over the last three months.
Revenue jumped 43% to $3.6 billion, in line with forecasts, while net income rose to $290 million from $178 million.
Netflix's adjusted earnings of 64 cents compared to 63 cents expected by analysts surveyed by S&P Global Market Intelligence.
"Our job is to spend this money wisely to increase our members' delight," the company said in a quarterly letter to shareholders.
Netflix may be the leader in subscription streaming, but there are countless new services launched or in the planning -- 200 or so already in operation. And industry heavyweight Disney plans its own service to begin streaming its own movies and TV series late next year.
"The consumer has a lot of entertainment options," Hastings said. "Whether our share of that grows or shrinks is really up to do we produce great content, market it well, serve it up beautifully and if we do that really well, if we earn more of consumers' time, then we continue to grow," he said. "If we get lazy or slow, we will get run over like anyone else."
Hastings was also asked about consumer privacy and tech services amid the concerns about possible misuse of user data on Facebook. Since Netflix doesn't need to connect users with advertisers, the service is different from some other tech giants, he said.
"I'm very glad we built Netflix not to be ad-supported, but subscription," Hastings said. "I think we are substantially inoculated from the other issues that are happening in the industry."