Netflix tipped to add up to 5m subs this year

Netflix will add four to five million new domestic streaming subscribers this year, taking the total to a potential 34 million, according to new research.

Influential credit ratings agency Moody’s noted: “While the first quarter is typically a strong quarter for the company and we don’t expect such levels of growth to continue into the second and third quarter, we believe Netflix is well placed to meet our expectations of four to five million new domestic streaming subscribers in 2013.”

Moody’s added that the company must focus on increasing the financial performance of its streaming business as the number of higher margin DVD customers declines.

Netflix reported quarterly results earlier this week and posted a healthy uptick in streaming subscribers with two million new domestic customers added, taking the total to 29.2 million. Domestic DVD customers meanwhile, decreased by over one million year on year, taking the total to 8 million.

While many industry watchers have questioned whether Netflix’s outlay on content is sustainable – it currently has long term programming commitments totaling US$5.7 billion – Moody’s lauded the US-listed company for growing its subs base while keeping programming spend in control.

It noted: “Netflix also demonstrated its ability to manage content costs while growing subscribers, as its total content liabilities (including off balance sheet liabilities) increased by only US$100 million in the first quarter.”

Increasing margins on the streaming side of the business is crucial, Moody’s added. The profit margin from the streaming business in the first quarter was 20.6%, an increase on the 19.2% recorded in the previous three-month period.