- The Washington Times - Monday, July 25, 2011

Film-rental giant Netflix announced its second-quarter earnings Monday and proved its prices for DVD rentals by mail aren’t the only things going up.

The California company reported a second-quarter profit of $68.2 million, $1.26 a share, on revenue of $788.6 million, up 55 percent from earnings of $43.5 million, or 80 cents per share, on sales of $519.8 million in the same period of 2010.

Netflix earlier this month angered customers by announcing a sharp increase in the monthly price for its combined mail-order and streaming services. The number of global subscribers from last quarter rose from 23.6 million to more than 25 million users. For the first half of 2011, Netflix reported total revenues of $1.5 billion, up from $1.01 billion in the first six months of 2010.

But the second-quarter numbers company fell short of many analysts’ predictions, and the company’s share price was off 9.2 percent in after-hours trading to $255.66.

Netflix’s price hike this month for its signature red-envelope mail service was seen by many as a move by the company to channel subscribers into the far less costly delivery over the Internet. Instead of unlimited DVDs and unlimited online streaming for $9.99 a month, customers now must pay $7.99 a month separately for each service.

Netflix Inc., headquartered in Los Gatos, Calif., saw its second-quarter numbers fall short of many analysts' predictions, and the company's share price was off 9.2 percent in after-hours trading to $255.66. (Associated Press)
Netflix Inc., headquartered in Los Gatos, Calif., saw its second-quarter numbers fall ... more >

Netflix said in a letter to shareholders Monday that “with the rapid adoption of streaming, DVD shipments for Netflix have likely peaked.”

The announcement provoked a huge backlash from many of the service’s users. Thousands of customers threatened on sites like Facebook and Twitter to cancel their accounts.

Netflix said it raised the prices because movie studios raised their fees, but many angered customers accused them of trying to knock off customers who use the DVD service to convert all users to streaming, which is cheaper.

Netflix management did not offer an estimate of how many subscribers will cancel, but a large customer exodus appears to be factored into the company’s forecast for the current quarter.

Netflix expects to add as few as 190,000 subscribers or as many as 1.29 million subscribers in the current quarter. Either figure would be a falloff from the 1.9 million subscribers added in the April-June period. In last year’s third quarter, Netflix added nearly 2 million subscribers.

But Netflix officials said they are looking forward. The company plans to expand into 43 Latin American and Caribbean countries in the second half of the year.

“Latin America represents a large and rapidly growing market of broadband households (currently about 40 million),” the company report said. “Consumers there enjoy Hollywood content.”

This article based in part on wire service reports.