3 Things Netflix Management Wants You to Know

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Netflix (NASDAQ: NFLX) just posted another quarter of strong growth. Subscribers increased by nearly 10 million, representing record growth. Revenue increased 22% year over year, or 28% in constant currency.

But there's more to the quarter, of course, than these headline figures. In the company's first-quarter shareholder letter, management provided a closer look at its operations and more insight about its expectations for the rest of the year. Here are three takeaways from the letter.

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Netflix's price increases are going well

Earlier this year, Netflix announced meaningful price increases in the U.S. While the increases were effective immediately for new subscribers, they would take three months to roll out to existing subscribers. Increases are also rolling out in other international markets.

Fortunately, members seem undeterred by the price increases, suggesting things will go smoothly for Netflix as the rest of its price increases take place.

Price increases will be good for business. Netflix expects average revenue per user to accelerate during the current quarter. Management guided for average revenue per user to increase 2% year over year in Q2, up from a decline of 2% year over year in Q1. In constant currency, management expects average revenue per user to rise 7% year over year in Q2.

Expect an exciting second half of 2019

Though Netflix surprisingly guided for streaming paid net member additions of five million in Q2 -- less than the 5.45 million it added in the second quarter of 2018, the company expects growth to kick into high gear in the second half of the year as the company rolls out lots of new, quality content.

Helped by this aggressive content-launch schedule, management said investors can expect record annual paid net member additions for the full year of 2019.

Netflix believes its addressable market remains significant

With nearly 150 million paid members, some investors may worry the company's growth opportunity is nearly tapped out. Netflix, however, believes there's significant runway ahead. Indeed, management asserts that there's so much room that new entrants in the space like Apple and Walt Disney are unlikely to have a material impact on Netflix at all.

Driving this point home, Netflix pointed out that its streaming hours in the U.S. only represent about 10% of TV viewing.

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