In a letter to accompany their earnings, which were announced this afternoon – the first since the unpopular announcement of a price rise, Netflix CEO Reed Hastings remained bullish on the firm’s growth and value proposition. He and CFO David Wells announced that around 75% of new subscribers opt for a streaming-only package, and although those who still use the DVD-by-mail service will be “upset” by the impending price hike (as much as 60% in some cases), the executives still believe they offer “a fantastic service”.
NetFlix added 1.8 million subscribers in the second quarter, bring their total customer base to around 24.6 million in the United States. The company believe they will not add many new subscribers in the next quarter, however they will likely make up those lost subscribers and then some when their oft-rumoured international expansion goes ahead next year.
Netflix’s competitors continue to bolster their offerings – Amazon recently bundled free unlimited streaming for all Prime subscribers – however the video giant remains unfazed. Hastings was particularly quick to dismiss Hulu, who only added 325,000 customers in Q2 compared to Netflix’s 2 million, and confirmed they would not be making an offer for the TV streaming service due to its focus on ad-supported content – something Netflix has traditionally avoided.
The unpopularity of the recent price rise will certainly be a low point for Netflix, who have seen near-universal acclaim and astronomical uptake of their service since they launched in 1997.
First a DVD rental by mail service, Netflix expanded into streaming in 2008 and has been pushing its customers that direction ever since. Streaming offers better value for consumers in the form of unlimited consumption, as well as instant availability. Netflix also saves money with streaming by doing away with the need for postage costs and DVD storage and sorting facilities. Currently 40% of Netflix’s customers are streaming-only, and this is only set to grow as fast broadband and Netflix-compatible devices become more widespread.
