Yesterday Netflix’s earnings report was directly in line with what analyst projected, but the internet streaming service’s stock price still dropped about 7% in after-hours trading.
Analysts and investors are concerned with how Netflix plans to increase its subscriber base.
Netflix CEO Reed Hastings and CFO David Wells held a webcast yesterday in lieu of the traditional earnings call. The two explained that the company is investing in original series as a way to boost subscribers. Netflix calculates the cost of producing a show as an investment instead of an expenditure.
There was a “small but noticeable” member bump from “Arrested Development” but the bump didn’t help Netflix reach the 900,000 new subscribers Wall Street was hoping for. Netflix added 630,000 subscribers in the U.S. during the second quarter bringing the total to 29.81 million U.S. subscribers.
Morgan Stanley’s Scott Devitt and John Egbert believe that Netflix’s original series are “yielding tangible benefits to member singups and churn.”
While Netflix wouldn’t reveal actual viewership numbers for its original series it did note that it has renewed all of its series for a second season. Hastings emphasised the importance of the company renewing its original series as, “a very positive sign”.
Netflix also pointed out that it will produce original documentaries and stand-up comedy specials as a way to attract new members.
The company’s newest series, “Orange Is The New Black” is doing better than Emmy-nominated, “House of Cards” and all other shows the company has released.
Each original series is doing better than the last which you could argue is a good thing. As long as Netflix can continue to demonstrate to investors and Wall Street that it is scaling quickly and effectively it will continue to perform well.
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