Netflix: Profits Increase 5 Times but Investors Still Worried

Netflix, the largest video streaming site on the internet has reported a profit that is nearly five times more than its profit in the same quarter last year. But surprisingly, the share prices of the company went down by nearly 6% to be trading at $245.35 just a few hours after the declaration of these fantastic results. This was because the rise in profits was because of an exercise to rein in costs rather than addition of new customers big time. Despite the much hyped and advertised season of the series Arrested Development, Netflix has been unable to lure many new customers to the fold of its subscribers.



netflixIf an ordinary shareholder goes by numbers, he should be happy. This is because the company reported a profit of $29.8 million this quarter that stood at $6.2 million ion this quarter last year. This is an increase of five times. The revenues of the company have similarly gone up by 20% to touch $1.07 billion. What is making the investors nervous is the numbers of new customers added to the fold of the customer base of the company. In this quarter, the company reported adding up just 6,30000 new customers to its fold. This is better than the numbers that the company projected for itself but much less than what shareholders expected from it. It is this disappointment with the performance of the company that is being reflected in the drop of the share prices of the company.


Netflix has been doing what it can. Its original series House of Cards has been nominated in 9 categories in Emmy Awards and it has high hopes from the new season of Arrested Development. As Netflix gears up to compete with other channels that stream original content such as HBO, it finds that adding on to its customer base and taking it beyond 29 million to around 60 and then perhaps 90 million is not an easy joke.


The financial gains made by the company have failed to impress the investors and the revival of the much liked Arrestednetflix-logo1 Development has failed to add on to the tally of the customer base for the company. This award winning comedy series had been absent for the last 7 years and the company was hoping its new season would add substantially to its fold of customers. Arrested Development, a comedy that starred Michael Cera and Jason Bateman and having a cult following for the three seasons that it was aired, was cancelled by Fox in 2006. The announcement of revival of this series raised expectations of adding up of many more customers than the results shown by the company in this quarter.


Reed Hastings, the CEO of Netflix, has nevertheless thanked the shareholders and credited this comedy series for giving a small but noticeable bump to the number of subscribers of the company. He praised the efforts of the company amidst increasing competition from HBO, Amazon and Hulu.