Netflix said Monday that it added 3.3 million U.S. subscribers in the first quarter, putting it in a tie with Comcast as the nation’s biggest subscription-based video entertainment firm with 22.8 million users.
The subscriber growth continues a remarkable rise for the Los Gatos, Calif., giant that quickly went from facilitating mail-order DVDs to streaming Internet videos.
To stay ahead, the company said in a quarterly note to investors, it will seek more licensing arrangements with Hollywood firms. It wants to strike two to three more exclusive partnerships such as the one recently made with Media Rights Capital’s “House of Cards” series planned for late 2012.
But in a tumultuous industry in which fortunes change quickly, Netflix CEO Reed Hastings outlined several risks for the company as the industry’s leading Internet video distributor.
Competition has increased with Dish Network’s acquisition of Blockbuster to offer streaming video services. Hulu’s premium Plus and Amazon Prime compete for online video users. Cable and satellite firms offer on-demand movies and television too.
“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,” Hastings wrote in a letter to investors.
It said its growth in Canada was strong but more expensive to do than originally expected. Netflix said it wants to enter another international market by early next year.
But even with its success in Canada — up 290,000 subscribers to a total of 800 million in the first quarter — Hastings noted the threat of data caps. The concern is that data caps will curb video viewing by users. Netflix changed its default settings for subscribers in Canada so that they don’t consume as much bandwidth.
Hastings said he is watching the move to data caps by AT&T, which has set monthly limits to 250 gigabytes.
The smarter way to go, the company opined, was to limit speeds at peak viewing hours such as Sunday evenings.
“Data caps are actually a very poor way to manage demand and limit Internet congestion,” Hastings wrote in the investor note. “Bandwidth consumed off-peak is completely free; it literally has no marginal costs.”