Peter Kafka

Recent Posts by Peter Kafka

Netflix Says Its Price Hike Will Clip Revenues for a Quarter

A quick first look at the Netflix Q2: Revenue of $788.6 million, earnings of $1.26 a share; Wall Street was looking for $791.5 million and earnings of $1.11 per share. Analysts are unlikely to be happy with the company’s guidance for the next quarter, though.

Some important metrics to pay attention to:
24.59 million U.S. subscribers, plus another 1 million in Canada. That’s in line with exepectations.
Projected subscribers in Q3: Up to 27 million, which is a little lighter than analysts were looking for.

Q3 revenue guidance: Up to $828 million, which will again disappoint Wall Street.
Q3 EPS guidance: From $0.72 to $1.07 per share, also lower than expectations.

Not surprisingly, shares are down initially, dropping more than 7 percent after hours.

Reed Hastings seems to indicate that some of the shortfall is because of its recent price hike, which is meant to push subscribers away from DVD rentals and toward streaming: “Because of the timing of the price change, revenues will only grow slightly on a sequential basis”.

Hastings does say that he won’t completely abandon DVDs, though, noting that he’ll start marketing the DVD-only service in the last three months of the year, “something we haven’t done for many quarters.” By the end of Q3, he says, Netflix will have 10 million streaming-only customers in the U.S., 3 million DVD-only customers, and another 12 million who will get both formats.

Netflix has pushed up the operating losses it expects to incur from international expansion this year from $70 million to $80 million; that’s the second time the company has bumped that number up.

Netflix also says it is not bidding on Hulu, but that’s no surprise.

As always, here’s Citigroup analyst Mark Mahaney’s “cheat sheet” so you can play along at home. Pay particular attention to subscription growth projections (click chart to enlarge).

The Netflix earnings call starts at 6pm eastern; I’ll be back then to listen in and will update if needed.


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Another gadget you don’t really need. Will not work once you get it home. New model out in 4 weeks. Battery life is too short to be of any use.

— From the fact sheet for a fake product entitled Useless Plasticbox 1.2 (an actual empty plastic box) placed in L.A.-area Best Buy stores by an artist called Plastic Jesus