Netflix plans price raise as streaming subscribers grow

LOS ANGELES Mon Apr 21, 2014 10:48pm EDT By
Lisa Richwine

(Reuters) - Video streaming service Netflix Inc said it intends to raise its subscription price for new customers by $1 or $2 a month to help the company buy more movies and TV shows and improve service for its 48 million global subscribers.

Investors welcomed the announcement on Monday by Netflix, which had suffered from a consumer exodus and stock plunge after it announced an unpopular price increase in July 2011. The company's shares jumped 6.7 percent in after-hours trading to $371.97, after the company released plans for price hikes and posted a rise in first-quarter profit that beat Wall Street expectations.

Chief Executive Reed Hastings said Netflix had improved its selection of TV shows and movies and added original series like critically acclaimed Kevin Spacey thriller "House of Cards."

With added revenue from higher prices, "we will be able to license much more content and deliver it in very high quality video," Hastings said on a webcast.

The company, in a quarterly letter to shareholders, said it plans to impose "a one or two dollar increase, depending on the country, later this quarter for new members only."

Subscription fees will rise in each of the 41 countries where Netflix operates, Hastings said in an interview. Existing customers will keep their current price for one to two years, he said.

Netflix has "room to raise prices," FBN Securities analyst Shebly Seyrafi said, because "they're still seeing a lot of demand" for the service.

The company said in its earnings report it added 2.25 million customers to its U.S. streaming business during the quarter that ended in March, in line with the company's earlier guidance, for a total of 35.7 million. In international markets, its customer base reached 12.7 million, a gain of 1.8 million during the quarter.

Net income for the quarter reached $53 million, an increase from $3 million a year earlier. Earnings-per-share came in at 86 cents, topping the average forecast of 83 cents, according to analysts surveyed by Thomson Reuters I/B/E/S.

During the quarter, it released the second season of critically acclaimed Kevin Spacey drama "House of Cards."

Netflix is investing in original series, such as "House of Cards" and "Orange is the New Black" to attract and keep subscribers. If faces competition from online video players like Amazon.com Inc and Hulu, as well as on-demand content from cable operators.

Netflix also said it opposed Comcast Corp's proposed purchase of Time Warner Cable Inc. In March, Netflix reluctantly agreed to pay "interconnection" fees to Comcast for faster delivery of its TV shows and movies.

"Comcast is already dominant enough to be able to capture unprecedented fees from transit providers and services such as Netflix," the company said in its letter. "The combined company would possess even more anti-competitive leverage to charge arbitrary interconnection tolls for access to their customers."

Netflix said those fees had improved Netflix service for Comcast customers, but singled out AT&T's fiber-based U-Verse as providing "lower performance" than many other providers.

Comcast responded in a statement that the Netflix opposition to the planned merger was "based on inaccurate claims and arguments." "There has been no company that has had a stronger commitment to openness of the Internet than Comcast," the company said.

(Reporting by Lisa Richine; Editing by Ronald Grover, Bernard Orr)

U.S. judge dismisses case against Twitter alleging pre-IPO fraud

NEW YORK Mon Apr 21, 2014 10:48pm EDT By
By Jonathan Stempel

(Reuters) - Twitter Inc has won the dismissal of an unusual lawsuit accusing the social media company of fraudulently arranging a private stock sale it never intended to complete, with a goal of stoking interest in its November 2013 initial public offering.

U.S. District Judge Shira Scheindlin in Manhattan said Precedo Capital Group Inc and Continental Advisors SA failed to show that Twitter was responsible for the cancellation of a secondary market offering they had been arranging with another firm, GSV Asset Management Inc.

Filed one week before Twitter went public, the $124 million lawsuit accused the company of using GSV as its agent to arrange the aborted offering as a means to raise more money in its eagerly awaited IPO and justify a $10 billion market valuation.

Noting the plaintiffs dealt directly with GSV and never with Twitter, however, Scheindlin said the complaint "does not plausibly allege that Twitter granted GSV Asset express authority to act as its agent for any purpose.

"Moreover," she added, "the complaint does not allege that Twitter secretly limited that authority contrary to the standard practice in the securities industry."

Scheindlin dismissed the case with prejudice, meaning it cannot be brought again.

Joseph Baratta, a partner at Baratta, Baratta & Aidala representing the plaintiffs, did not immediately respond to requests for comment.

Twitter did not immediately respond to similar requests. The San Francisco-based company has said the lawsuit lacked merit.

The lawsuit claimed Twitter had been seeking to avoid repeating problems that afflicted Facebook Inc's 2012 IPO, and sidestep the potential for an excess supply of its shares by controlling transactions in the private market.

Precedo, a broker dealer licensed in Arizona, and Continental, a Luxembourg financial adviser, claimed GSV offered to provide up to $278 million of Twitter shares that they could market to other investors.

But they said that, after the marketing process began, Twitter caused GSV to cancel the offering on October 5, 2013, upon learning that investors were willing to pay $19 per share, above the $17 or less offered in other private transactions.

The firms said Twitter cost them fees and reputational damage and sought $24.2 million of compensatory damages plus $100 million of punitive damages. GSV was not a defendant.

Twitter priced its IPO at $26 per share on November 6, 2013, then valuing the company at $14.1 billion.

Twitter shares were up $1.10, or 2.4 percent, at $46.11 in Monday afternoon trading on the New York Stock Exchange.

The case is Precedo Capital Group Inc v. Twitter Inc, U.S. District Court, Southern District of New York, No. 13-07678.

(Reporting by Jonathan Stempel in New York. Editing by Andre Grenon)