LOS GATOS, CA – Netflix has returned to the black after losing $4.6 million last quarter in its first ever net loss.
In a note to shareholders,CEO Reed Hastings and CFO David Wells said that the streaming service ended the second quarter of 2012 with 27.6 million global streaming members and $6.2 million in net income.
In its seventh quarter since launching international operations, Netflix reported 3.62 million international subscribers after adding nearly 600,000 in the quarter ended June 30, representing 13% of its total streaming customers (international figures include Canada, Latin America, the U.K. and Ireland).
Netflix said that its Canadian service continues to grow well in both subscribers and hours viewed. Since launching here 22 months ago, the service is now in more than 10% of Canadian households, and the company said that it has achieved enough scale to begin to generate contribution profits.
“We achieved a small contribution profit in Canada in Q2 and expect to remain profitable in this market going forward, as we manage our content and marketing expenses to grow more slowly than members and revenue”, reads the note. “We intend to steadily increase our contribution margin in much the same way as we are doing for our U.S. streaming business.”
Noting the availability of films like Rise of the Planet of the Apes, Mr. Popper’s Penguins and Kung Fu Panda 2 in the first pay TV window, Netflix said that the first four seasons of TV series Breaking Bad and all six seasons of Lost “are setting viewing records in Canada for us”.
Total international revenue this quarter was $65 million, driven by the overall growth in international members and the conversion of free trials to paid subscribers in both Latin America, the UK and Ireland. Total contribution loss of $89 million improved by $13 million compared to Q1, as subscriber revenue growth exceeded the growth of content expenses while marketing expenses declined post-UK launch.
Netflix said that it expects to exceed 4 million total international members in Q3, with another half million net additions in the quarter (at the mid-point of guidance), consistent with Q2’s net additions. “Our outlook assumes that viewing of the summer Olympics in July will dampen acquisitions across all of our markets”, the note continued.
The service also confirmed that it is on track to launch in an unnamed European market in the fourth quarter, which it says will temporarily drive it back into the red.
