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Update: Netflix Profits up as It Shifts into Streaming

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Netflix continued to improve, gaining subscribers for the quarter and recording healthy profits and revenue. The percentage of its customers who watched streaming video also skyrocketed, evidence that the company's shift toward streaming is on target.

Netflix reported net income of $43.5 million for the second quarter of 2010, on revenue of $519.8 million. Net income grew 34 percent from a year ago, and revenue also increased by 27 percent from the same period last year.

Netflix also recorded growth in its subscriber base, adding a total of 3.06 million to the Netflix ranks, to a total of just over 15 million subscribers. About 10 percent of that subscribes to the Blu-ray service, executives said.

“Our rate of subscriber growth continues to accelerate and we added more than a million net new subscribers for the third consecutive quarter," said Netflix co-founder and chief executive Reed Hastings, in a statement. “Consumers are clearly enthralled by our offering of unlimited movies and TV shows streamed over the Internet."

Netflix also said that the percentage of subscribers who viewed its “Watch Instantly" streaming video, or more than 15 minutes of a TV episode or movie, sometime during the second quarter was 61 percent, versus 37 percent for the same period a year ago, and 55 percent for the first quarter.

Virtually all users subscribe and use the disc service, which gives access to the latest releases, as well as stream video, Hastings said in a conference call.

Netflix gave detailed guidance for its third and fourth quarters, predicting net income of $33 million to $40 million on revenue of $546 million to $554 million for the third quarter, on 16.3 million to 16.7 million subscribers; and $32 million to $40 million in net income for the fourth quarter, on $580 to $596 million in revenue, with an estimated subscriber base of 17.7 million to 18.5 subscribers.

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