Netflix Revenues Stall While Subscribers Soar

July 21, 2010 By Nick Mokey

Increasing profits and subscribers weren't enough to keep Netflix stock from sagging on Wednesday when the company revealed second-quarter earnings below analyst expectations.

Netflix continues to pile on subscribers – and profits – but higher Wall Street expectations still sent the stock tumbling on Wednesday. Despite announcing that its second-quarter profits were up by 34 percent and that it had added another 1 million subscribers, Netflix shares fell by 9.2 percent the same day, due to revenues that fell below analyst expectations.

The company reported sales up 27 percent to $519.8 million, but still came in shy of the $525.4 million analysts predicted, according to Bloomberg. Part of the reason may be subscriber preference for the company’s cheapest plans. A year ago, each subscriber paid $13.29 per month, on average. Now, that figure has fallen to just $12.29 a month.

But what’s bad news for stockholders may be good news for customers. Earlier this week, Netflix announced that it would open up service to Canada, and Wednesday, Netflix CEO Reed Hastings pledged that Netflix would increase spending to acquire more exclusive streaming content for its subscribers.

Showing 6 comments

Bolton at 4:41am 29th July 2010 You want me to tell you how to increase earnings? Don't give great service for the 1st month then switch to crap so that people quit the service or switch to a less expensive plan. After our first month, we stopped getting the good recently released movies. Everything was always "Long Wait". So we switched to a cheaper plan from 3 movies out at a time to 1 movie out at a time... The we renewed our Blockbuster subscription.
Chris at 4:36am 26th July 2010 bobjr, your loigic is flawed. The biggest thing pushing the netflix trend is the online streaming. So while dvds/ BR prices may continue to fall, the bandwidth to your home will only increase with technology. I thing your peak then fall comment is off base. I believe that once speeds catch up across the US, DVD/BR/any physical media will become a thing of the past. What better way to prevent piracy, control content and such than to have all the movies on their own servers. If anything, I see netflix as the end to physical media
bobjr94 at 3:00pm 23rd July 2010 Every time I goto the store there is always 2-3 people in line at one of the redbox rentals machines. And dvd seem to have dropped to 10-12$ for many new releases and bluray/dvd combos for 15-20$, once you get to 10$ you may as well buy the ones you like. Over the next few years Im sure their rental prices will go up, as costs and postage rise and dvd & bluray prices will fall a bit more so there growth will peak & fall. Netflix could have been huge if they came out in the 90's, when pirated movies were harder to find, dvr's, legal movie downloads, on demand and when dvd's cost 20$.
pcme2000 at 1:28pm 23rd July 2010 Ya but now you have to wait 28 days for the new releases. I have my netflix account on suspension while i am trying out the Block buster online. so far so good. And you get the new releases.
Christine Alexander at 9:04am 23rd July 2010 We have really enjoyed Netflix TV download movies - with the kids home all summer - it's been a God send. Movies are limited but plentiful.
Michael at 7:57am 23rd July 2010 They could make a lot of money if they allowed all Americans and others that are overseas to access their services.