Netflix Posts Strong Subscriber Numbers, Now Bigger Overseas

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SVOD leader Netflix wowed Wall Street yesterday with strong Q2 subscriber numbers. The second quarter is usually a weak one for streaming, and analysts were expecting new customers to rise by 3.2 million. Instead, Netflix added 5.2 million new subs. Debuts of strong original programming, including the latest season of House of Cards and new show 13 Reasons Why appear to have given the company a boost.

This growth marks an important milestone for Netflix, as it now has more subscribers overseas than in has in the United States. Succeeding across the globe is critical for the company, as it nears the subscriber saturation point at home. It now counts 52.03 million customers abroad and 51.92 in the U.S. Of the 5.2 million added this quarter, 4.14 million were non-U.S.

Revenues rose 32 percent to $2.8 billion, with Q2 profits of $65.6 million (up nearly 60 percent year-over-year). The good news gave Netflix's stock a 10.4 percent jump yesterday in after-hours trading.

Not everyone thinks the Netflix celebrations are appropriate: Mike Milligan, senior director for Limelight Networks, says the emphasis should be on customer loyalty, not customer acquisition.

"There’s no doubt that the most significant piece of Netflix’s earnings is its growth in subscribers, exceeding expectations with 5.2 million added over the last quarter," Milligan says. "But Netflix’s growing audience is no longer something to celebrate—in fact, it should be expected as more people get sick of their cable companies and inevitably decide to cut the cord. As the streaming industry in the U.S. becomes increasingly saturated, it’s becoming less about onboarding new subscribers and more about retaining them with new kinds of content and solid viewing experiences that keep viewers engaged and loyal."

One question now is whether or not Netflix's original content strategy is sustainable. The company currently spends $6 billion per year on original content.

Netflix's DVD-by-mail business is slipping: It declined 17.3 percent year-over-year to $114.7 million, comprising 4.2 percent of total revenue.

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