Today: Netflix adds another 4 million customers to its streaming-video service, pushing the company's quarterly sales in that area past $1 billion for the first time.
The Lead: Netflix announces price increase as streaming service keeps growing
Netflix announced Monday that it will begin charging new customers more to access its streaming service after the offering added another 4 million customers in the first three months of 2014, passing $1 billion in quarterly revenues for the first time.
The Los Gatos company said in its quarterly letter to investors Monday that it would increase its monthly subscription rate for streaming video by $1 or $2, depending on the country, later this quarter for new customers. Current U.S. customers, who pay $7.99 for the base Netflix streaming package, will remain at their current subscription rate "for a generous time period," CEO Reed Hastings and Chief Financial Officer David Wells wrote in the letter.
In a conference call after the announcement, Hastings pegged the increase to Netflix increasing original content offerings.
"If we want to continue to expand to do more great original content -- more series, more movies -- we will have to eventually increase prices a little bit," Hastings said. "We're not doing much, we're doing a dollar or two depending on the country, and all the existing subscribers keep their current price."
Hastings added that he believes current subscribers will be grandfathered in to current subscription rate for a year or more.
Netflix has added to its costs by targeting high-profile original series such as "House of Cards" and "Orange is the New Black," and is looking to bolster those offerings with more spending power, with expectations of doubling its spending on original content in 2014.
"We're rapidly expanding our original production," Chief Content Officer Ted Sarandos said in Monday's conference call.
"When you look at the size and scope and the ambition level of some of these projects, you'll see that this is a great time for consumers because people who were never working in television before are thrilled to be working in television today and doing some of the best work of their lives," Sarandos later added. "At higher budgets, sure, but that's a good thing for everybody, including us, because we're in position to bring that kind of production level to our members."
Netflix has run into trouble with customers before when attempting to increase prices. In 2011, the company hastily severed its DVD-by-mail business from its streaming service, charging separate subscription rates for the two services that were previously bundled and increasing rates for customers who wanted both offerings by up to 60 percent, causing a revolt by customers. A few months later, Hastings announced that the DVD-by-mail business would spin off into its own company, dubbed Qwikster, but that decision was quickly rescinded.
"There is a difference between moving quickly -- which Netflix has done very well for years -- and moving too fast, which is what we did in this case," Hastings said while dropping the Qwikster idea.
Since that debacle, Netflix has steadily regained its momentum on both Wall Street and Main Street, finding growth in its streaming service subscriptions in 2013 while its stock price shot higher. The company reported 4 million new streaming subscribers in the first three months of 2014, pushing streaming revenues for the period to $1.07 billion. In total, Netflix reported net income of $53 million, or 86 cents a share, on revenues of $1.27 billion, thanks to 48.35 million streaming subscribers.
Netflix stock shot higher in after-hours trading: After closing with a 0.8 percent gain at $348.49, Netflix shares topped $370 in late trading.
SV150 market report: Apple gains amid green push, Samsung trial
Wall Street gained Monday and Silicon Valley stocks had a stronger day as the world's most valuable company, Apple, advanced amid an environmentally friendly campaign and the continuing patent trial with Samsung in San Jose.
Apple rose 1.2 percent to $531.17 after announcing that it would offer free recycling of its popular consumer gadgets as part of a green push that will include efforts to make all of the company's retail outlets, offices and data centers run on renewable energy. The announcement, which arrived a day before Earth Day, was joined by a new section of the Apple website devoted to the issue, a video narrated by CEO Tim Cook, and a media blitz by Lisa Jackson, Apple's vice president of environmental initiatives."What the company wants to do is use all our innovation and all of our expertise to make the planet more secure and make the environment better," Jackson, who ran the Environmental Protection Agency before joining Apple, told The Associated Press. Apple's lawyers continued to fight rival Samsung in court Monday, as the two sides debated the monetary damages of Samsung's alleged patent infringement, with Apple's total of $2.2 billion far apart from Samsung's estimate of $38 million. Apple will announce its quarterly earnings Wednesday, and analysts disagree on the revenues Apple will announce.
Facebook will join Apple in Wednesday's earnings report blitz, and the Menlo Park company also gained in Monday trading, adding 3.9 percent to close at $61.24 as analysts likewise took shots at predicting the social network's first-quarter sales. Facebook's social-media rivals also enjoyed strong performances Monday: LinkedIn gained 0.8 percent to $176.90 after announcing a new milestone Friday, Twitter rose 2.4 percent to $46.13, and Zynga advanced 4.2 percent to $4.47 ahead of its own Wednesday earnings report. Monday's biggest gainer in the SV150 was Advanced Micro Devices, with the Sunnyvale chipmaker roaring 11.7 percent higher to $4.12 in the first trading session since the company's earnings report was released Thursday afternoon. Cadence Design Systems, the 45th largest technology company in Silicon Valley, joined Netflix in announcing earnings Monday afternoon, revealing quarterly net income of $33 million, or 11 cents a share, on revenues of $379 million; the San Jose chip company's shares mostly stuck around the closing price after the report. Gilead Sciences gained 2.3 percent to $71.60 after Citigroup named it one of its top 50 stocks to buy, and Google dropped 0.7 percent to $539.37.
Up: AMD, Pandora, Zynga, Facebook, SunPower, Yelp, Tesla, Twitter, Gilead, VMware, Electronic Arts, Apple, Juniper, LinkedIn, Cisco, Nvidia, Netflix, SanDisk, Applied Materials, SolarCity
Down: Workday, Splunk, Palo Alto Networks, Google, Intel, Ruckus Wireless, eBay, Intuit
The SV150 index of Silicon Valley's largest tech companies: Up 10.7, or 0.78 percent, to 1,380.22
The tech-heavy Nasdaq composite index: Up 26.03, or 0.64 percent, to 4,121.55
The blue chip Dow Jones industrial average: Up 40.71, or 0.25 percent, to 16,449.25
And the widely watched Standard & Poor's 500 index: Up 7.04, or 0.38 percent, to 1,871.89
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.