April 22, 2005, 12:00 AM

Q1 revenue at Netflix rises 54% to $154 million

Netflix grew its first-quarter revenue 54% year-to-year to $154 million and its number of subscribers 56% to over 3,000. But a drop in profit margins widened its net loss 52% to $8.8 million, Netflix said.


Engaged in a market battle with Blockbuster Inc., online DVD rental service Netflix Inc. grew its revenue 54% year-over-year to $154 million in the first quarter ended March 31 and its number of subscribers 56% to over 3 million, including 2.88 million paid subscribers. But a rise in cost per customer acquisition and a drop in profit margins widened its net loss 52% to $8.8 million from $5.8 million, Netflix said.

Company executives and analysts remained upbeat about the company’s future performance. Safa Rashtchy, senior Internet analyst and managing director at investment firm Piper Jaffray & Co., said in a report on Netflix this week that he expects Netflix to maintain its lead over Blockbuster because of a better service offering, even though he expects Netflix will continue to battle tough competition over the next two years.

CEO Reed Hastings said that, despite deep discounting by its competition, he expects Netflix to hit its target of four million subscribers by the end of this year.

Netflix last fall dropped its basic monthly fee 22% to $17.99 from $21.99 for renting. Netflix provides free mailers and allows subscribers to rent an unlimited number of DVDs per month, with up to 3 out at any one time. Blockbuster charges $14.99 for a similar service.

Netflix said gross profit margins for the first quarter declined to 38.4% from 43.6% a year ago, as acquisition cost per subscriber rose 8% to $37.89 from $35.12 a year ago.


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