Netflix earnings Way up despite Growing Competition

Netflix revealed this week that its earnings are up 88% compared to this time last year. The subscription movie service reported a net income of $60 million on its Q1 report.

More than 3 million new subscribers have signed on to Netflix since January, pushing its total number of viewers to 23.6 million — more than those buying Comcast cable alone. (Comcast still has many more subscribers than Netflix does if you count the customers who buy video service alongside voice and Internet.)

Netflix’s earnings have benefited from a price increase on its hybrid service that took effect with its pure streaming plan in November. While the changes were made in Q4 of 2010, they took effect in Q1. Meanwhile, Netflix set a new company record for marketing spend.

Netflix is reaping the benefits of establishing a post-Blockbuster model of video rentals. Several competitors have launched to challenge it in the last 12 months — Hulu Plus and Amazon’s Prime Instant Video. Dish Networks, which purchased Blockbuster in April, will likely launch a subscription streaming effort under that brand.

The competition helps explain why Netfix has a new focus on original content. It has made exclusive partnerships with CBS and Lionsgate, as well as a non-exclusive agreement with Fox in Q1.

“Our competitive strategy relative to other streaming services is simply to grow as fast as we can, so we can afford more content, more marketing, and more R&D than our competitors,” explains Netflix’s Q1 letter to its shareholders.

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