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Netflix Q2: 'It Was a Good Quarter'

17 Jul, 2017 By: Erik Gruenwedel

SVOD pioneer adds 5.2 million subs, ups profit 60%

Netflix July 17 announced its own summer blockbuster. The subscription-streaming video behemoth said it added a record 5.2 million subscribers in the second quarter (ended June 30), to finish the period with nearly 104 million subs globally. Analysts had projected 3.2 million new subs. Through the first-half of the year, new subs are up 21% from a year ago.

The service added more than 1 million subs domestically, with the bulk of new members (4.14 million) generated internationally. Net income skyrocketed 60% to $66 million, compared with $40 million in the previous-year period. Revenue increased 32% to $2.8 billion.

“It was a good quarter,” CEO Reed Hastings and CFO David Wells wrote in the quarterly shareholder letter.

Indeed, while domestic sub growth continues to mature, Netflix is basing its future on global viewership. Foreign subs now account for 50.1% of total members. International operations swung back to into the red ($13 million loss), but preformed better than the $28 million loss forecast.

Netflix is projecting 3.65 million net new subs in Q3, as is expecting “positive” international contribution profit for the fiscal year.
“This would mark the first ever annual contribution profit from our international segment,” Hastings and Wells wrote.

The fiscal results come on the heels of 91 Emmy nominations, nearly twice the noms last year. Netflix had the most nominated series of any network.

With Netflix significantly upping original movie production, including 40 titles this year, Hastings and Wells made no apologies releasing titles into streaming channels concurrently with limited theatrical. The strategy has angered theater operators, with most boycotting any Netflix release.

“We understand that our approach to films — debuting movies on Netflix first — is counter to Hollywood’s century-old windowing tradition. But just as we changed and reinvented the TV business by putting consumers first and making access to content more convenient, we believe internet TV can similarly reinvigorate the film business (as distinct from the theatrical business),” Hastings and Wells wrote.

Finally, Netflix’s legacy by-mail disc rental service generated a $62 million operating profit on revenue of $115 million. The segment generated $71 million operating profit on revenue of $139 million a year ago. Total subs topped 3.75 million, unchanged from the same-period a year ago.

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