Netflix's (NFLX) U.S. streaming contribution margin rose to 25.2% in Q1 from 23.4% in Q4 and 20.6% in a year ago. International contribution margin improved to -13.1% from -25.9% in Q4 and -54.2% a year ago.
U.S. margin is expected to further improve to 26.7% in Q2, and international margin is seen improving to -3.9%. Netflix's price hikes should provide a boost to Q3 margins.
Optimistic though it is about the ability of its international ops to turn profitable this year, Netflix nonetheless expects international expansion to pressure Q4 free cash flow.
The company also plans to ramp investments in marketing its original content, albeit while "spending less on direct-response advertising such as banner ads touting free trials."
Having already taken shots at Comcast in his net neutrality manifesto, Reed Hastings has now come out against the Time Warner Cable deal. "Comcast is already dominant enough to be able to capture unprecedented fees from transit providers and services ... The combined company would possess even more anti-competitive leverage to charge arbitrary interconnection tolls."