July 21, 2014, 5:13 PM

For Netflix, profit is the new black

The streaming video service’s net income jumped 140% in Q2 to $71 million on $1.34 billion in revenue.

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Despite raising the price of its subscription plans for new subscribers, Netflix Inc. managed to gain 1.7 million new streaming subscribers during the second quarter, pushing it past the 50 million subscriber mark for the first time, the content streaming service reported today in its Q2 earnings statement.

Those new subscribers helped contribute to a healthy quarter for Netflix; it generated $1.34 billion in revenue between its streaming and DVD-by-mail services, up 25.2% from $1.07 billion a year ago. Through June 30, revenue is $2.61 billion. Net income jumped 140.74% in the quarter to $71.0 million from $29.5 million a year ago.

More than a million of those new subscribers are from outside the United States, and Netflix executives, in a letter to shareholders, wrote that it is striving to gain more international subscribers. They say the company  will launch streaming services to consumers in Germany, France, Austria, Switzerland, Belgium and Luxembourg in September. 

“Our broad success from Argentina to Finland has convinced us to further invest aggressively in global expansion,” wrote CEO Reed Hastings and chief financial officer David Wells. They also noted that Netflix will debut physical gift cards consumers can use to pay for their Netflix subscriptions. The cards will be available in some stores in the United States, Canada, Mexico and Germany by the end of the year. “In newer markets, gift cards help build the brand and provide an easier alternative for consumers to join Netflix in markets with developing online payments,” the letter says.

Netflix’s international operations are not yet profitable—the international segment reported a $15 million loss in Q2—and the e-retailer forecasts a further loss of $42 million in Q3 as it spends more to expand in Europe.

The e-retailer credits its original programming for helping drive subscriptions. “Orange is the New Black,” the Netflix-produced series now in its second season, was the most-watched show on Netflix in June.     

For the second quarter ended June 30, Netflix, No. 7 in Internet Retailer’s Top 500 Guide, reported:

  • Net income was $71.0 million, up 140.7% from $29.5 million in Q2 2013. For the year through June 30, it is $124.1 million.
  • 36.2 million domestic streaming subscribers, who together generated $838.2 million in revenue, up 24.9% from $671.1 million in Q2 2013. To date, domestic streaming revenue is $1.64 billion.
  • 13.8 million international subscribers, who together generated $307.5 million in revenue, up 85.4% from $165.9 million in Q2 2013. To date, international streaming revenue is $574.6 million.
  • 6.3 million domestic DVD subscribers generated $194.7 million. Netflix’s domestic DVD subscribers have been declining for the past several quarters, and were down 16% from 7.5 million in Q2 2013.

 

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