Netflix is popular and profitable again

the unintended upside of watching way too much netflix

Video streaming and rental service Netflix has finally climbed out of the shadow of last year’s price hike shadow, and returned to profitability. The company announced today its second quarter 2012 results, which shows that it generated $889 million during the quarter that ended in June. This awarded Netflix about $6 million in profits, and $0.11 per share for investors.

Despite this being on the high side of the company’s expectations for the quarter, its financial performance remains well below what it was last year. During the same period in 2011, Netflix generated $68 million in profit, on $1.26 per share.

The subscriber numbers were also lower than expected. Wall Street had hoped for 24.3 million U.S. streaming subscribers, 9.1 million DVD customers, and 3.7 million total international customers (which includes Canada, Latin America, and the UK). Instead, Netflix landed 23.9 million U.S. streaming subscribers, 9.2 million DVD subscribers, and 3.6 international customers. In other words, it came up about 300,000 people short of what investors were hoping.

And boy, do investors hate being wrong: Netflix dropped as much as 14 percent in after-hours trading.

Netflix appears to be counting 2011 as a lost year. While its fateful decision to boost the cost of bundling streaming and DVD delivery service by 60 percent came in July, and the failed attempt to relaunch its DVD business under the Qwikster name not long after, the company is just now getting back to 2010 levels of business. Still, subscriber additions remain at 50 percent of 2010’s Q2 level.

Netflix CEO Reed Hastings, while optimistic, writes in his investors letter (pdf) that the upcoming quarter is going to be a tough one for the company — thanks to the Olympics.

This quarter the Olympics are likely to have a negative impact on Netflix viewing and sign-ups,” he writes. “So, our Q3 guidance is 1 million to 1.8 million domestic net adds. If we finish Q3 in the high end of that range, we would remain on track for 7 million domestic net additions for the year; otherwise it would be challenging to achieve that goal by year end.”

Of course, none of this is really that important for the average Netflix customer. Though the company may still be struggling, it’s not likely to simply go under anytime soon. What really matters is content. And on that front, well, things look… OK.

“We continue pursuing innovative deals with others,” writes Hastings. “One such deal is an output arrangement with The Weinstein Company that will allow us to have an exclusive window for theatrical titles that will begin after the expiration of their first Pay window. This first-of a-kind deal will give Netflix members access to all Weinstein theatrical films in what had traditionally been the first Free TV window — just 12 months from the start of the Pay TV window, as opposed to the traditional holdback of nearly 8 years. Among the titles we will soon have are last year’s Academy Award winner, The King’s Speech and the highly acclaimed Blue Valentine. Next year we’ll get My Week with Marilyn and The Iron Lady.”

Hastings says that neither HuluPlus nor Amazon Instant Video have been able to “gain meaningful traction” against Netflix, and that Redbox Instant, which Verizon will soon launch, “will face a big challenge to break into the top 3 of subscription streaming services.” Hastings says that, while HBO Go is a popular competitor, “it is also possible that we will find opportunities to work together — just as we do with other networks.”

Cable and satellite networks, like Comcast, which offer their programming through mobile apps, remain the biggest threat to Netflix, says Hastings.

Home Theater

I’ve seen the 8K TV future, and you should be excited. Here’s why

Samsung set the tech world on fire when it announced it would sell an 85-inch 8K TV in the U.S. along with several 8K screen sizes in Europe. Debates over the validity and value of such a high resolution have continued since, and we're here…
Home Theater

Looking to cut cable? Here’s everything you need to know about Pluto TV

Pluto TV offers plenty of entertainment in a fashion similar to live internet TV services, only at no cost — you don’t even need to register. Too good to be true? Here’s everything you need to know.
Home Theater

AT&T takes aim at Netflix with HBO-led streaming service set for a 2019 launch

HBO fans have worried that parent company AT&T was looking to turn it into Netflix, but the company is now looking to instead launch a new, separate streaming service with programming from HBO, as well as Warner properties.
Movies & TV

Lose the torrents. Here's how to watch 'Game of Thrones' online (legally)

Game of Thrones is one of the most popular shows on TV, but unless you're a cable subscriber, finding a way to watch isn't always easy. Check out our guide on how to watch online, whether you prefer using HBO, Sling TV, Hulu, or Amazon.
Movies & TV

The best new movie trailers: ‘Glass,’ ‘Mortal Engines,’ ‘Pet Sematary’ and more

Everyone loves a good trailer, but keeping up with what's new isn't easy. To simplify things, we round up the best ones each week. On tap this week: New trailers for Pet Sematary, Glass, Mortal Engines, and other upcoming films.
Movies & TV

The best movies on Amazon Prime right now (October 2018)

Prime Video provides subscribers with access to a host of fantastic films, but sorting through the catalog can be an undertaking. Luckily, we've done the work for you. Here are the best movies on Amazon Prime Video right now.
Movies & TV

‘Venom’ devours the box office competition with monstrous second weekend

Sony Pictures anti-superhero movie Venom won the weekend box office for the second straight week, beating musical drama A Star is Born, as well as three new releases that made it into the weekend's top ten movies.
Movies & TV

Best new shows and movies to stream: ‘The Haunting of Hill House’ and more

Need something to watch this weekend? Check out our list of the best new shows and movies to stream right now. On the list this week: The Haunting of Hill House season 1, The Romanoffs, and more.
Movies & TV

'Prime'-time TV: Here are the best shows on Amazon Prime right now

There's more to Amazon Prime than free two-day shipping, including access to a number of phenomenal shows at no extra cost. To make the sifting easier, here are our favorite shows currently streaming on Amazon Prime.
Emerging Tech

Here’s all the best gear and gadgetry you can snag for $100 or less

A $100 bill can get you further than you might think -- so long as you know where to look. Check out our picks for the best tech under $100, whether you're in the market for headphones or a virtual-reality headset.
Home Theater

Dish Network or DirecTV: Which is the better choice for you?

So, you’ve chosen to go with a satellite television provider. Check out our quick rundown of what both Dish Network and DirecTV offer in terms of content, hardware, and pricing, and why you might choose them over streaming services.
Movies & TV

New 'Mandalorian' photo links series to Boba Fett and 'Star Wars Holiday Special'

Jon Favreau's live-action Star Wars series planned for Disney's streaming video service will be titled The Mandalorian. The series will be one of the most expensive television shows ever made. Here's everything we know about it so far.
Movies & TV

'Avengers 4' directors signal the end of reshoots with mysterious photo

The events of Avengers: Infinity War changed the Marvel Cinematic Universe in some big ways and left fans wondering how its heroes can possibly recover. Here's everything we know about Avengers 4, the sequel to Infinity War.
Movies & TV

Celebrate the 25th anniversary of ‘The X-Files’ with the show’s 10 best episodes

The X-Files premiered 25 years ago, so here are the 10 best episodes of the award-winning sci-fi series. From alien-abduction drama to hilarious satires, these are the best episodes from all 11 seasons of the hit series.