Netflix adds 1.69 million members in 2Q 2014

LOS GATOS, Calif. — Netflix, Inc. (NASDAQ: NFLX) has released its second-quarter 2014 financial results.

Highlights from the letter to shareholders:

“Our U.S. member base grew to more than 36 million on the strength of our ever-improving content offering, including Orange is the New Black Season 2. For Q3, we expect about 1.3 million net additions, comparable to Q3’13 in which we premiered Orange Season 1. We are pleased our net additions in the U.S. remain on par with last year.

Outside the U.S., we generated continued growth in all of our markets. We ended Q2 with 13.8 million international members, growing 78% y/y. In September, we’ll be launching Netflix in Germany, France, Austria, Switzerland, Belgium, and Luxembourg. This launch into markets with over 60 million broadband households will significantly increase our European presence and raise our current international addressable market to over 180 million broadband households, or 2x the number of current U.S. broadband households.

Summary results – Streaming (in millions)

                                                                 F'cast
                Q1 '13  Q2 '13  Q3 '13  Q4 '13  Q1 '14  Q2 '14   Q3 '14
                ------  ------  ------  ------  ------  ======   ------
Total:
 Net Additions    3.05    1.24    2.73    4.07    4.00    1.69     3.69
 Total Members   36.31   37.56   40.28   44.35   48.35   50.05    53.74
 Paid Members    34.24   35.63   38.01   41.43   46.14   47.99    50.89

Domestic:
 Net Additions    2.03    0.63    1.29    2.33    2.25    0.57     1.33
 Total Members   29.17   29.81   31.09   33.42   35.67   36.24    37.58
 Paid Members    27.91   28.62   29.93   31.71   34.38   35.09    36.52

International:
 Net Additions    1.02    0.61    1.44    1.74    1.75    1.12     2.36
 Total Members    7.14    7.75    9.19   10.93   12.68   13.80    16.16
 Paid Members     6.33    7.01    8.08    9.72   11.76   12.91    14.37

Product

MVPD Set-Top Boxes

The Netflix app on Virgin Media set-top boxes in the U.K. continues to be a compelling streaming experience that delivers above-median viewing and satisfaction. We continue to gain traction in our international markets with set-top box integration and, in the U.S., launched the Netflix app on the TiVo platform with several regional MVPDs including Suddenlink, RCN, Grande and Atlantic Broadband during the quarter. MVPDs would rather their customers’ use Netflix on their set-top and remote than use Netflix on Internet set-tops such as Apple TV, partially because that drives the pay-per-view consumption for the respective set-top owner.

Android TV Platform

The Netflix app for Google’s Android TV platform will appear on TVs from Sony, Sharp, and others in the coming months. Widespread adoption of Android TV can reduce the number of different platforms we need to support to ensure Netflix is broadly available on Smart TVs delivering a consistently first-rate experience, no matter the vendor. Android TV incorporates Google’s “cast” feature, allowing content discovery on mobile devices and laptops with streaming delivered to the big screen.

Smart TV growing in Latin America

Post World Cup, the number of Smart TVs used for Netflix viewing in Latin American countries is at a new high; in fact, the percentage of viewing from Smart TVs in Latin America is higher than any other region we serve. Members accessing Netflix on a big screen generally watch more and retain better than members using smaller devices.

UHD 4K Video Quality

We are now streaming flagship content in UHD 4K to members with 4K Smart TVs, putting Netflix at the leading edge of high-quality AV delivery. Already, Samsung, LG, and Sony have in retail around the world 4K Smart TVs, and House of Cards Season 2 and all seasons of Breaking Bad are now available for streaming in the new format. Content available to stream in 4K will grow steadily as several of our original series are or will be shooting in 4K, including Marco Polo, Sense8, and Narcos. UHD 4K will be an Internet-centric format as linear TV will be late to switch their networks to UHD 4K.”