Netflix Nets .7 Million Members in Q

From left: Jessica Pimentel, Taylor Schilling and Jolene Purdy in Netflixs Orange Is the New Black (Credit: JoJo/Whilden)

Netflix netted 1.7 million subscribers during the second quarter, giving it 83 million worldwide, the company reported July 18. However, the 1.7 million was disappointing for the company, after it had forecasted 2.5 million net new subscribers for the quarter, a gap the company attributed to more competition and consumer concern over monthly fee increases.

We are growing, but not as fast as we would like or have been, the company said in a statement. Disrupting a big market can be bumpy, but the opportunity ahead is as big as ever and we continue to improve every aspect of our business. With our large subscriber base, slight variances in retention versus forecast can result in significant swings in net adds, particularly in a seasonally small net add quarter like Q2.

Related: Netflix Gets Star Trek Outside North America

Netflix had delayed price increases for its existing customers until this summer, and expects to finish grandfathering all its customers into its new price scales by the end of the year. People don't like price increases, Netflix CEO Reed Hastings said during the company's second quarter earnings presentation. We know that.

Netflix ended the second quarter with operating income of $70 million and a profit of $41 million, both well above what the company forecasted, on revenue of $1.97 billion.

Most of Netflix's new subscribers came overseas, as just 160,000 were in the U.S., where the company has already seen saturation, and plenty of other services to contend with.

Related: As Netflix Reports 2Q Earnings, Sub Growth Key

As internet TV rises in popularity, so do the SVOD offerings. In the U.S., for example, CBS All Access, Seeso, Amazon Prime Video, Hulu, YouTube Red, and many others are all growing, Netflix said in a statement. Our view, however, is that we are all growing primarily against linear TV hours and that competition did not contribute materially to our miss in Q2.

For the third quarter, Netflix sees the Olympics having a potentially negative impact on its fiscal results, something that could be offset by Netflix's inclusion on the X1 platform, if the timing pans out. The company expects to add 300,000 net subscribers in the U.S. and 2 million internationally in the third quarter.

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