California-based Netflix reported robust quarterly earnings this week, surprising analysts' expectations. Netflix said that it signed 220,000 domestic streaming users in its last fiscal quarter, bringing its U.S. userbase to 21.7 million. The company noted, however, that it continued to lose customers in its mail order segment, affirming 2.8 million people ended their subscriptions, bringing that division's total to 11.2 million.
Last year, Netflix went from a Wall Street darling to the scourge of shareholders, announcing that it planned to offer a more intricate pricing plan that separated its streaming and mail delivery segments. Company officials argued that the move would help increase profit but customers revolted, canceling their subscriptions in huge numbers.
Shares of the company's stock plummeted over the past six months as a result, but the company's latest financial report helped bolster investor sentiment. Netflix chief executive Reed Hastings said that the company's financial prospects were improving, and that it had successfully implemented cost reduction measures over the past few months that had increased profitability.
Moreover, he affirmed that profit margins at the company's streaming division were improving, an encouraging trend as the media firm has had to spend heavily to acquire additional content.
"Since we significantly outperformed our 8 percent domestic streaming contribution margin target in Q4, we are increasing our Q1 contribution margin target to approximately 11 percent," Netflix said in a statement.
Netflix customers are spending more and more time watching movies and television shows through its streaming service, Hastings said. During the last three months of 2011, Netflix users spent more than 2 billion hours watching content on the website and through the company's application, which can be downloaded on tablet and smartphone devices.
Netflix said, however, that it expects to post a loss in its current fiscal quarter. The company will have to scale back cost reduction campaigns over the coming months in an effort to ink new media partnerships, and that will result in a loss of between $9 million and $27 million, the company forecast.
Nevertheless, the company said its fiscal performance turned a corner at the end of last year and that it expects its streaming subscriber base could climb as high as 23.6 million by the end of the quarter. It projects its DVD userbase, on the other hand, to decline to around 9.4 million.