UPDATE, 3:25 PM: This is weird. It isn’t just that CEO Reed Hastings wouldn’t comment on the big story of the day — his talks to secure an exclusive streaming deal for DreamWorks Animation’s films. Netflix requires analysts to email their questions, so there was no opportunity for someone to ask a follow-up. Hastings simply says that “we’re always in talks with all of the different providers.” Ugh. As for the price change, Hastings says that although “we feel bad about having customers upset with us,” the company anticipated the widespread anger and still feels “great about the decision.” Netflix wasn’t looking specifically to raise consumer prices, he says. The company wanted to separate the U.S.-based DVD rental business from its global streaming-only business — the main focus now. “The pricing change was an outcome of that.” He says it will generate more revenue for the company by year’s end.
PREVIOUS, 1:27 PM: Looks like Netflix won’t escape unscathed from the 60% price hike for its combined DVD rental and online streaming service. CEO Reed Hastings says in a letter to shareholders that in Q3 “we will see only the negative impact of the pricing change,” with domestic subscriber net additions lower than in the same period last year. Also, revenues “will only grow slightly on a sequential basis.” Still, Hastings defends the price change saying that Q4 could be “our first billion-dollar revenue quarter, driven by strong U.S. performance.” Netflix says that in Q2 it generated $68M in net income, up 54.5% vs the same period last year, on revenues of $789M, up 51.7%. The profit figure, at $1.26 a share, solidly beat the $1.11 consensus among analysts who follow the company. But the revenue figure was light. Analysts expected nearly $792M. Netflix says it had 24.6M subscribers as of June 30, up 7.9% from March. There’s still no word about a streaming deal with DreamWorks Animation. But you can be sure it will come up this evening when the company holds a conference call with analysts. Stay tuned.
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