Netflix Q2 profits up, shares down, subscribers go both ways

Posted by Rhuaridh Marr
July 24, 2012 6:27 PM |

It's been an odd time for Netflix. After raising prices 60 percent last year, the company suffered public outcry at plans to separate its DVD and streaming businesses (later scrapped), lost subscribers across a financial quarter for the first time in years, lost $5 million in Q1 2012, and watched share values fall from $130 in February to $62 in June. Conversely, it expanded operations internationally into Europe and Latin America, and inked a deal to bring much-loved sitcom Arrested Development back to our screens. However, it's also suffering under increased demands from studios wanting more money for their content, as well as non-renewal of contracts -- most notably with Starz.

Things continue to be a mixed bag for the company. In its Q2 earnings report, as reported by CNN Money, Netflix posted $889 million in revenue with a profit of $6 million, finally returning the company to profitability after several losses due to its expansion efforts. However, weak outlooks for Q4 have dragged shares down a further 13 percent, with further European expansion expected to eat into profits. This has eroded the 10 percent jump in share price earlier this month, after Netflix announced that in June over 1 billion hours of content were consumed.

Not helping is a failure to keep up with ambitious subscriber goals. Netflix aimed to add 7 million new subscribers in the U.S. by the end of the year, with current subscriptions standing at 24 million. However, though 2.3 million streaming customers have been added since January, Netflix has lost over 850,000 DVD rental customers. Worldwide streaming subscriptions stand at 27.56 million, or just over 3.5 million outside the U.S., suggesting international expansion hasn't been as successful as hoped.

With competition from Amazon Prime Instant Video and Hulu Plus, not to mention Verizon's soon-to-launch Redbox Instant, it remains to see just how successful the rest of Netflix's year will be.

Still, there's new episodes of the Bluth family to look forward to next year. Silver linings, am I right?

Lucille Blth

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