‘Orange Is New Black’ Vaults Netflix Past 50 Million Users

By Sonali Basak  

Photographer: Andrew Harrer/Bloomberg

The political drama “House of Cards” from Netflix Inc. grabbed its first best-comedy... Read More

Netflix Inc. (NFLX), the world’s largest online-subscription service, posted second-quarter signups that beat analysts’ estimates as the women’s prison series “Orange Is the New Black” lifted users past 50 million.
Net income more than doubled to $71 million, or $1.15 a share, from $29 million, or 49 cents, a year earlier, Los Gatos, California-based Netflix said today on its website. That met the average of 30 analysts’ estimates compiled by Bloomberg. Sales grew 25 percent to $1.34 billion, matching projections.
“Orange Is the New Black” became the company’s most-watched series with its new season, topping “House of Cards” and helping to attract subscribers. In Latin America, shoppers buying Web-enabled TVs for World Cup soccer also stoked signups. Netflix expands in September to Germany, France and four other European markets.

“These are good numbers,” said Daniel Ernst, an analyst at Hudson Square Research in New York who recommends buying the stock. “But more importantly, it sets them up for future growth. It sets them up for the next 50 million as they go global.”
Netflix rose less than 1 percent to $455 after the announcement. The stock gained 1.8 percent to $451.95 at the close in New York and is up 23 percent this year.
The company added 570,000 domestic streaming customers in the quarter, beating its own forecast of 520,000 and lifting the U.S. total to 36.2 million.

International Customers

International customers rose by 1.12 million to 13.8 million. Latin America consumers who watch Netflix on big-screen televisions tend to watch more and be more loyal, according to the company.
“What was incredible is just how straight our line of net additions were in Brazil, during the World Cup,” Chief Executive Officer Reed Hastings said today on a video conference call.
This quarter, Netflix forecasts profit of 89 cents a share, short of the $1.02 a share projected by analysts. The company expects to add 3.69 million new customers, including 1.33 million in the U.S. and 2.36 million overseas.
The profit outlook reflects added foreign expansion costs, Hastings said in a letter to investors. Netflix sees a $42 million loss outside the U.S. in the current period, wider than the $15 million in the period just ended, with results improving as the company adds subscribers.

Shrinking Losses

“We hope it’s similar to our success in the past, where there are significant upfront losses that abate over the coming years,” Hastings said in a telephone interview. “Our long-term guidance is to run the company at breakeven as we’re engaging in this international expansion.”
The company forecasts total streaming revenue of $1.22 billion in the third quarter, a sum that excludes the DVD-by-mail business. Analysts’ forecast revenue of $1.38 billion, including DVDs.
Netflix is getting critical buzz for its shows, garnering 31 Emmy nominations this month and challenging premium pay TV networks like HBO and Showtime.
The company is also considering expanding into producing feature films that could run simultaneously in theaters and on the Netflix streaming service, Hastings said in the interview.
“The benefit is consumers having the choice, in the theaters if they want a big event out or in the home,” Hastings said. “But we haven’t figured out how to do that.”

Price Increase

The company began charging new customers $1 to $2 a month more for its online service during the quarter, reflecting confidence that original shows like the Kevin Spacey political thriller “House of Cards” would draw new viewers.
Hastings said in April that he expected little additional revenue from the price increase at first, and that the company would use the proceeds to invest in new content.
Netflix continues to see the potential for 60 million to 90 million U.S. customers and has said it eventually expects international revenue to exceed domestic sales.
“It’s really this growing demand for control and for the consumer to be able to click and watch what they want,” Hastings said on the call. “That’s why we’re stepping up on the international expansion. We really see this is an enormous moment in history as on-demand Internet services are coming to the fore around the world.”