To lure subscribers, Netflix has been pouring resources into exclusive programming and original series, including "Orange Is the New Black." By EMILY STEEL July 21, 2014 Netflix surpassed 50 million total members in the second quarter this year, the company said Monday, with international markets fueling growth and the video streaming service experiencing little adverse impact from a price increase for new subscribers.
Netflix said it added 1.69 million new subscribers globally — including those who signed up for free trial memberships — to reach 50.05 million. International markets delivered 1.12 million of those additional members.
Total paid subscribers increased to 47.99 million, up 34.7 percent from the same period last year.
The results underscore a pivotal shift in Netflix's business. Three years ago, the company was reeling from a plan to increase prices and split itself into two separate companies: one for its DVD mailing group, the other for its streaming service. Consumers reacted with outrage; about a million subscribers canceled the service, and the share price plunged to less than $53 from just under $300.
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Netflix quickly apologized and abandoned the plan. Since then, the company has steadily turned its business around, based on the thesis that Internet television is replacing traditional television, apps are replacing channels, remote controls are disappearing, and screens are proliferating. To lure subscribers, the company has been pouring resources into acquiring exclusive programming and original series, including the critically acclaimed political drama "House of Cards" and the prison comedy-drama "Orange Is the New Black."
Now, with the growth of its domestic streaming service slowing, Netflix is pinning its future on international expansion. Available in 40 countries, Netflix has announced plans to introduce its service to a number of European markets this year, including Austria, Belgium, France, Germany, Luxembourg and Switzerland.
The company is forecasting continued growth for the third quarter. It expects to increase its total subscribers by 3.69 million, to 53.74 million, in the quarter, with more growth coming from outside the United States.
"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 2 times the number of current U.S. broadband households," Reed Hastings, chief executive of Netflix, said in a letter to investors.
Total revenues for the company increased 36.9 percent over the same quarter last year, to $1.34 billion. Net income was up 144 percent to $71 million, or $1.15 per share.
During the quarter, Netflix unveiled details on its plan to increase subscription rates for new members in the U.S. and other international markets. In May, the company announced an increase in its monthly price, to $8.99 from $7.99, for new subscribers. Current Netflix subscribers keep their current rate for two years.
The news comes as a series of tectonic deals are set to reshape the television business. Awaiting regulatory approval are Comcast's $45 billion deal for Time Warner Cable, and AT&T's $45.8 proposed takeover of DirecTV. Netflix has been an outspoken critic of the Comcast-Time Warner Cable tie-up.
Also making waves is 21st Century Fox's pursuit of the media group Time Warner Inc. that, if consummated, would create a behemoth in the television and entertainment industry. Analysts have raised concerns that should the merger occur, it could affect Netflix's leverage in acquiring original programming.
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