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Netflix posts strong earnings and takes aim at traditional movie theaters

Netflix posts strong earnings and takes aim at traditional movie theaters


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Back in April of this year, Netflix broke the news that it has reached 100 million subscribers. That gives it far and away the largest subscriber base of any global streaming video service. And all those paying customers have boosted Netflix’s revenue to new heights. Today the company announced that it made $2.785 billion in revenue for the second quarter of 2017. And it turned a tidy profit, reporting $66 million in net income, up about 50 percent from the same period last year.

The most important number for investors, of course, was subscriber growth. There, Netflix beat expectations: it added 5.2 million new customers in total during the second quarter of this year, versus its forecast of 3.2 million. 1.1 million of these new customers came from the United States, and 4.1 million came from overseas, where most of the company’s growth investments are focused.

In its letter to investors, Netflix highlighted the broad range of content it is now serving up. “The volume and breadth of our releases in Q2 exemplify our commitment to serve the desires of our diverse and growing audience,” the company wrote. “We premiered 14 new seasons of global Netflix original series, 13 original 2 comedy specials, 6 original documentaries, 2 original documentary series, 9 original feature films and 7 seasons of original series for kids.”

Netflix has already collected a number of Emmy awards, and it has helped shape the kind of programming made by traditional television studios. Now it wants to take aim at the film business. In its letter to investors Netflix wrote, “We understand that our approach to films - debuting movies on Netflix first - is counter to Hollywood’s century-old windowing tradition. But just as we changed and reinvented the TV business by putting consumers first and making access to content more convenient, we believe internet TV can similarly reinvigorate the film business (as distinct from the theatrical business). This year we will release 40 features that range from big budget popcorn films to grassroots independent cinema.”

The company continues to invest heavily in original content, borrowing money to supplement its cash flow so that it can create more programming. Free cash amounted to -$608 million this quarter, compared to -$254 million for the same period a year ago, and -$423 million in the first quarter of this year. The company expects it will have free cash of -$2.0 to -$2.5 billion for the full year 2017. But with the share price near an all-time high, continuing revenue and subscriber growth, and modest profitability, the company sees no reason to stop taking on debt.