Netflix losing money in Canada as service establishes itself north of the border

Netflix (NASDAQ:NFLX) today said it lost money in its Canadian movie streaming operation during the first quarter, but said losses were "in line" with its earlier guidance as "lower costs offsetting slightly lower-than-anticipated subscriber revenue."

The company Monday reported first quarter earnings of $60.2 million, or $1.11 per diluted share, and said it added some 3.3 million subscribers, bringing its global total to 23.6 million.

Netflix said the Canadian operation, launched seven months ago, saw strong, consistent growth over that period, signing up some 800,000 subscribers so far, slightly below expectations.

The quarter was a busy one for the Canadian operation as Netflix ramped up new content deals--like its agreement with Paramount Pictures that will make all of the studio's movies available on Netflix streaming just a few months after DVD release. It also licensed several TV series from Sony.

Netflix said it would continue to increase its content spending in Canada, leading to another loss in the second quarter, but added that it expected to reach profitability there in the third quarter.

It also said it anticipated to grow subscriber rolls to between 900,000 and 1.05 million by the end of the second quarter.

Netflix, in a letter to shareholders, also continued to rail against the data caps several Canadian ISPs put on their Internet usage, saying the caps had negatively impacted its business, and saying  they were forcing Netflix to stream movies at lower quality than they do in the U.S. where caps-and prices-are more reasonable.

"Canadian consumers have been outspoken against the excessive charges they face, and hopefully Canadian ISPs will listen to them by raising the caps or abandoning them altogether," CEO Reed Hastings wrote in the letter.

For more:
- see Netflix's letter to shareholders
- see this Financial Post article

Related articles:
Netflix tips hand, slightly, on plans for two new international plays
Netflix sets revenue, subscriber records in Q1, and it looks to calm Hollywood's fears
Netflix CEO says no data crunch for U.S. service
Netflix Canadian deal with Paramount draws new battle lines
Netflix facing a fee battle in Canada?
Great White North finally gets Netflix streaming
Netflix lands 'day-after' deal with CBC for some TV content

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