Netflix Inc. surpassed rival HBO in domestic subscribers in the third quarter, a milestone it credits to buzz surrounding original series such as “Orange Is the New Black,” the Emmy nominations for the political drama “House of Cards” and other exclusive content.
The online movie and television subscription service borrowed a page from the cable network in launching high-profile original series, such as the drama that garnered “House of Cards” director David Fincher a prime-time Emmy award, to redefine its brand and attract subscribers.
The programming strategy appears to be paying off. Netflix reached 31 million subscribers in the U.S., compared with 29 million domestic subscribers for HBO, according to SNL Kagan.
Netflix Chief Executive Reed Hastings acknowledged that it may take several years before the service catches HBO when it comes to worldwide reach. Netflix has more than 40 million worldwide subscribers, up from less than 30 million a year earlier. HBO, by comparison, had 117 million subscribers worldwide at the end of 2012, according to parent Time Warner Inc.’s financial filings.
“As we grow, HBO is focusing on doing their incredible work … expanding more aggressively internationally,” Hastings said. “We hopefully grow a lot. I don’t know when we catch them.”
The subscriber growth helped fuel Netflix’s third-quarter net income, which reached $32 million, or 52 cents a share, for the three months ended Sept. 30. That’s four times its earnings of $8 million, or 13 cents, in the same quarter last year.
Revenue reached $1.1 billion, up 22% from the same period in 2012.
Investors reacted enthusiastically to the results. Netflix shares, which closed Monday up $21.49, or 6.4%, at $354.99, rose nearly 11% in after-hours trading to $393. The stock is up nearly 300% this year.