Netflix Tops 50 Million Worldwide Streaming Members

Updated: U.S. paid streaming subs surpass 35 million mark
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Netflix reported $1.15 earnings per share for the second quarter of 2014, generally in line with analyst expectations.

Overall the company has revenue of $1.34 billion. Its U.S. paid streaming members hit 35.09 million, with 47.99 million paid streaming members worldwide.

It also noted that total streaming members topped 50 million for the first time while total U.S. members were over 36 million.

During Q2 Netflix added 570,000 domestic streaming subs.

A Thomson Reuters poll of analysts predicted that Netflix would report $1.16 a share with revenue of about $1.3 billion, the Wall Street Journal reported. The company had said it planned to add 520,00 domestic steaming customers in Q2 and predicted that paid membership for streaming services would exceed 35.03 million.

In a letter to shareholders, the company noted: “our U.S. member base grew to more than 36 million on the strength of our ever-improving content offering ... For Q3, we expect about 1.3 million net additions, comparable to Q3’13 ... We are pleased our net additions in the U.S. remain on par with last year.”

Netflix stock was trading up 6.5% at $458.35 in afterhours trading at 1:15 p.m. PT.

Netflix has seen its stock soar by nearly 400% since 2013.

In the call and in a letter to shareholders, management reiterated its support of net neutrality and opposition to the Comcast acquisition of Time Warner Cable

“Our policy goals are for the FCC to not sanctify paid prioritization, and for the DOJ/FCC to block the merger of Comcast/TWC, or at the very least, to require as condition to approving the merger that the combined entity be prevented from charging for interconnection,” Netflix CEO Reed Hastings and CFO David Wells wrote to shareholders.

In the earnings call, Hastings stated that the most practical approach would be for the FCC to make a strong commitment to network neutrality as a condition for a merger. He also called Title 2 regulation an “imperfect” tool but didn’t elaborate.

Recent price increases for new members should help ARPU rise slowly they wrote, adding that “there was only minimal impact on membership growth from this price change.”

In terms of 4K content, management reported that content available to stream “will grow steadily as several of our original series are or will be shooting in 4K.”

Internationally the company reports ongoing strong growth that should continue with the launch in September in Germany, France, Austria, Switzerland, Belgium and Luxembourg. “This launch into markets with over 60 million broadband households will significantly increase our European presence and raise our current international addressable market to over 180 million broadband households, or 2x the number of current U.S. broadband households,” Hastings and Wells wrote.

The European expansion would, however, increase expenses, which would increase loses to around $42 million for the third quarter of 2014.

Wells estimated during the conference call that existing services would probably have broken even or come close to breakeven in the third quarter of 2014 without the other launches.

They also stressed that even with the European expansion, the company’s footprint would only include about one third of the world’s broadband home, “providing a great opportunity to build on our international success beyond 2014,” Hastings and Wells wrote.

Broadband homes are growing much faster outside the U.S., Wells explained during the call, opening up new growth opportunities. “We like what we see,” he said.

With the international expansion, Netflix is ramping up its original production and continues to spend heavily on content. In the second quarter of 2014, Netflix was on the hook for $7.7 billion in programming deals for streaming rights, up from $6.3 billion in the same period a year ago.

While the company is acquiring local content for its international expansion, Ted Sarandos, chief content officer, noted that the amount of local content tended to account for 10 to 20% of their offering and that much of their content was travelling very well internationally.

In terms of getting the Netflix service onto pay TV systems, Netflix noted that its partnership with Virgin in the U.K. was going well. Being on the first input was helpful to consumers, Hastings explained during the call, but added that “it is a nice positive, but not transformative.”

The company also reported that it still had 6.3 million DVD subscribers and that losses for the quarter of 391,000 were less than the 475,000 lost in the same period a year ago.

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