Parent Category: News | 23-07-2013
Even though it gained 630,000 US subscribers and raked in over a billion dollars in revenues, Netflix's Q2 2013 has been regarded as disappointing by financial analysts, with shares down 4% in after-hours trading.
The second quarter of the year has traditionally been a fallow field for Netflix due to increased net-add seasonality, but the company reported that in Q2 2013 it had generated a steady growth in members, revenue, and contribution profit.
For the three-month period ended 30 June 2013, Netflix recorded revenues of $1.069 billion driving a profit of $29.471 million. For the six months of the year, the over-the-top (OTT) leader banked $2.093 billion leading to a net income of $32.16 million
Netflix continued its positive subscriber trend in the second quarter, reporting that it had grown to nearly 30 million in its domestic market and eight million international members. The base Q2 streaming revenue was up 26% domestically and 155% internationally over the prior year. "We're feeling quite good about the business," commented CEO Reed Hastings during the company's official earnings call.
Looking ahead, Netflix projected that it would add 700,000 to 1.5 million subscribers in the United States in the third quarter. The company's international business continued to operate at a loss, but that was at least narrowed due to slightly higher member growth and lower than anticipated growth in content spending across multiple markets. Overall, Netflix added 610,000 streaming subscribers globally with membership growth in all markets. Netflix expects Q3 net additions to be above Q3 of 2012, bolstered in part by the launch of Netflix Netherlands within the quarter.
Netflix said that its success was due in some part to its movement into producing original content. In their quarterly letter to investors, Hastings and Netflix's CFO, David Wells, noted that when it comes to Arrested Development, which was launched in May, "This show already had a strong brand and fan base, generating a small but noticeable bump in membership when we released it."
They added: "Other great shows don't have that noticeable effect in their first season because they are less established. Our content mix, streaming and user experiences are all getting better and devices and bandwidth are improving. Countering this, competitors for consumer attention are also all improving, and the risk of US market saturation only grows as we do. Given these competing forces, we are very happy this year to be tracking slightly ahead of prior year in terms of net additions."
Yet as they voted with their wallets, investors expressed concern about the rate of growth going forward, worried in particular by guidance from Netflix that Q3 net additions would be more or less the same as the corresponding period in 2012.