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Netflix returns to profitability, loses DVD subscribers

updated 05:21 pm EDT, Tue July 24, 2012

Half a million new domestic streaming subscribers

Netflix announced financial results for its second quarter today, revealing that the video streaming company has returned to profitability as it seeks to undo the damage done to its reputation from last year's brief attempt at spinning off its DVD rental service. The Netflix posted a $6 million profit on $889 million in revenues for the quarter, and the company added a million new customers to its streaming service over the last six months. The DVD delivery that once formed the basis of the company continues to lose subscribers, but it is still turning a profit.

Netflix's $889 million in revenue for the quarter marks a two percent increase over the first quarter. The $6 million in total profits is up from the $5 million loss posted in the first quarter, but still down compared to the same quarter last year, when Netflix posted a $68 million profit.

The domestic streaming service saw an increase of 530,000 users in the quarter, down from 1.74 million added in the previous quarter. Revenues for the division were up $26 million, and profits from domestic streaming rose $16 million in the quarter. The margin for domestic streaming profits also jumped from 13.2 percent to 15.6 percent.

The domestic DVD delivery service lost another 850,000 subscribers this past quarter, though the rate at which subscribers leave the service may be leveling off. Netflix lost 2.76 million subscribers in Q3 2011 and 1.08 million in the fourth quarter of last year. Profits for the service remained strong, with the DVD segment posting a 46 percent margin and $134 million profits. About 9.2 million people still pay for DVD deliveries.

The company's international streaming efforts have yet to turn a profit, though losses from these efforts are down from the previous quarter. Netflix lost $89 million on its international operations this past quarter, compared to $103 million in the quarter previous. The company added another 560,000 new subscribers internationally, and it generated $65 million in revenues; up from $43 million in revenues for the first quarter. In total, Netflix has 3.6 million international customers, about 13 percent of its total streaming customer base.

Per-member viewing time also continues to rise year-over-year. The company did not, though, provide any specifics as to viewership numbers in its report, though it may do so in the conference call to discuss those figures.

Looking forward, Netflix expects continued profitability in the third quarter of this year. The company touted the fact that it had passed the million-subscriber mark in Canada, the United Kingdom, and in Latin America. Hulu Plus and Amazon Prime have yet to contend with Netflix in terms of viewing hours, but Netflix acknowledges increased competition from other services such as HBO GO and the efforts from the cable providers. The company believes, though, that consumers who are passionate about movies will continue to prove willing to pay for multiple services.

Netflix gave Q3 guidance for domestic each of its sectors, estimating between 24.9 and 25.7 million subscribers for domestic streaming, 3.9 to 4.4 million subscribers for international streaming, and 8.35 to 8.65 million domestic DVD subscribers. The company expects profits to come in somewhere between $6 million in losses and $8 million in profits for the forthcoming quarter.



By Electronista Staff
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  1. Athens

    Addicted to MacNN

    Joined: 01-15-03

    I tell a lot of people to pick up a AppleTV and Netflix because its pretty good. I think Netflix will continue to pick up subscribers in Canada and its just going to grow faster and faster as it penetrates the market. I imagine this will be the case for many of the international markets.

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