Rather than crow about its strong quarter, the streaming-video giant tempered expectations for the remainder of the year. That should tell you something.
At first blush, Netflix reported what seemed like blockbuster results.
On Monday, the streaming video giant said its earnings had more than doubled, to $71 million or $1.15 a share in the recently ended second quarter. Even better, Netflix gained 570,000 new streaming subscribers in the U.S., despite hiking costs by $1 a month in May, moving the company past the 50 million-subscriber mark.
Yet rather than spending much time crowing about these results, Netflix officials used its quarterly earnings report to try to temper investors’ expectations for the coming quarter. Why?
Either second-quarter results weren’t that great after all — or the rest of the year will be much more challenging than expected.
It’s the latter.
A few months ago, Morningstar analyst Peter Wahlstrom made this key point:
“The market is too optimistic about Netflix’s future sales growth and profitability potential. We remain skeptical about Netflix’s aggressive international push; we recognize the addressable market is large but sustainable and material profitability will be much harder than management currently anticipates and may drag on cash flow for the foreseeable future.”
He was right to be worried. On Monday, Netflix provided a clue as to how difficult it will be to sustain profitability while making an aggressive international push.
In a letter to shareholders, CEO Reed Hastings and chief financial officer David Wells warned that the company’s international video streaming operations, whose “contribution losses” had been gradually declining lately, would jump from $15 million in the second quarter to $42 million in the third quarter.
Meanwhile, they lowered expectations for third quarter earnings, forecasting that they would come in around 89 cents a share, down from $1.15 in the second quarter and considerably lower than the expected $1.02 a share, according to consensus forecasts by analysts tracked by Zacks.com.
Company leaders also used their earnings release to again reiterate their calls for so-called net neutrality, hinting at another area of potential vulnerability. Backers of net neutrality want Internet Service Providers (ISPs) such as Verizon, Comcast, and AT&T to treat all data equally, without giving preferential treatment — and speed — to preferred customers.
Without such a system, companies like Netflix have had to address speed issues by entering into individual agreements with ISPs to stream their content more quickly. The problem, though, as MONEY’s Taylor Tepper recently pointed out, is that such deals give “Internet service providers leverage to assess more such ‘tolls’ down the road.”
Yesterday, in after-hours trading, Netflix shares jumped immediately after the company announced its earnings.
But this morning, skeptical investors are starting to voice their concerns. So don’t be surprised if today, after digesting the actual details, the market reacts in a slightly different way.
Updated July 21 at 5:38 p.m.
Netflix’s customer base has passed 50 million members, the company announced in its quarterly earnings report Monday. The streaming service added 1.69 million new members during its second quarter, bringing the total to 50.5 million customers and generating $1.1 billion in revenue, slightly missing analysts’ projections of about $1.2 billion.
The company had earnings of $1.15 per share, missing projections by a single penny. Overall, Netflix generated $71 million in profit, triple the figure from a year ago.
In a letter to shareholders, the company touted the success of its original programming, noting that Orange Is the New Black is now the most-watched series on the service in every territory. The next shows on the company’s production docket will be the final season of the cancelled AMC show The Killing and a new adult animated comedy called BoJack Horseman, both of which premiere in August.
Netflix is also planning an aggressive international expansion later this year. The streaming service, which already has almost 14 million customers abroad, will launch in Germany, France, Austria, Switzerland, Belgium and Luxembourg in September. Netflix is prepping some original shows aimed specifically at foreign audiences, such as a soccer comedy that it will air in Spanish.
The company reiterated that it does not want to pay interconnection fees to Internet Service Providers to get its video content delivered to customers, an issue it has tried several times to fold into the zeitgeist of the ongoing net neutrality debate. “In the cable industry, there’s been constant conflict between the networks and cable distributors,” CEO Reed Hastings said in a video call with analysts. “We would hate to see ISPs brownout or blackout certain Internet sites while they try to extract payments.”
Netflix has also formally opposed the proposed merger between ISP giants Time Warner Cable and Comcast, unless the two companies are specifically banned from charging interconnection fees.
Soon you may not have to worry about your friends who share your logon making fun of you
Netflix is reportedly testing a feature that will allow you to conceal your viewing activity so you can hide your more embarrassing binge watches.
Cliff Edwards, director of corporate communications and technology, told Gigaom that the company is testing a “Privacy Mode” option that will keep what you’re viewing from appearing in your activity log and ensure that Netflix doesn’t use it to recommend future titles you you or anyone else who shares your account.
The Netflix rep told Gigaom that the feature is being testing in all markets, but not all users will have access. It’s still unclear if the feature will be released for everyone to use after testing.
The online retailer is entering the competitive e-book subscription game+ READ ARTICLE
The online retail giant Amazon announced Friday it’s launching an e-book subscription service called “Kindle Unlimited.”
Kindle Unlimited lets Amazon customers pay $9.99 every month for unlimited access to 600,000 titles plus more than 2,000 audiobooks accessible on any Kindle or Kindle app on any mobile device, according to the company. Amazon introduced the service in this video, which is unavailable for embedding in this post.
Titles available through the service include books like The Lord of the Rings trilogy and the the Harry Potter series. The more than 2,000 audiobooks available through the service are linked up with Amazon’s Whispersync program, allowing the reader to switch between reading and listening to the narrated text.
Depending on the details of how Kindle Unlimited was set up, the program may further complicated Amazon’s relationship with book publishers. Several of those publishers have been locked in a years-long tug-of-war with Amazon over the company’s pricing of e-books, which publishers argue has been too low. In a somewhat separate but related issue, Amazon is currently embroiled in a dispute with one publisher in particular, Hachette, most likely over the pricing of Hachette’s physical and digital books.
...or at Least Drive a Hard Bargain
If your relationship with your cable provider is driving you mad like this man, brace yourself. It’s only going to get worse.
The average monthly cable TV bill is rising 6% a year. It’s projected to hit $123 a month next year and top $200 by 2020, according to market research group NPD. To be fair, part of the surge is because the cost cable providers pay to license shows is getting steeper. But the near-monopoly that cable TV companies have in many places is to blame, too.
Most areas have just one or two pay-TV providers. And even if you’re lucky enough to have more choice, that will probably change if the Time Warner Cable-Comcast and AT&T-DirecTV deals are approved. And less choice means that the providers that remain don’t have to go above and beyond on customer service. As if they did already.
Can’t live without your favorite programs but fed up with the bill? Here are four moves you can make to cut the cost—and not all require you to cut the cord.
Downsize. How many of the 700+ channels that you get do you actually watch? A growing number of pay-TV providers are offering pared-down packages. Verizon recently rolled out its Select HD no-sports package that’s $15 a month cheaper than its $65 a month standard Prime package. Last year, Time Warner Cable launched Starter TV, a bundle of 20 premium channels plus HBO for $29.99 a month—40% less than its 200-channel, no-HBO option. And Cox Communication’s TV Starter is $24.99 a month for 155 channels vs. $49.99 for its Advanced package of 220 channels.
Play hardball. Despite their dominance, pay-TV providers are still loathe to lose customers, says digital media analyst Dan Rayburn. Call the cancellation department to talk with a retention specialist trained to hang on to customers. Ask about promotions or a discount if you’re a long-time customer. They’ll try hard to keep you, but if they don’t give, you can likely get a better deal as a new subscriber if you have a satellite dish or cable competitor where you live.
Go a la carte. Even though the Aero service that delivers low-cost broadcast TV via Internet shut down thanks to the recent Supreme Court ruling, there are still plenty of other lower cost alternatives for those who want to cut the cord, says technology industry analyst Jeff Kagan. Hulu Plus costs just $7.99 a month and shows many current programs the day after they air. If you can wait a season or two to catch up with your favorite shows, Netflix is $7.99 a month (though will go up $1 or $2 for new subscribers). Amazon Prime Instant Video, which comes with Amazon’s $99 a year Prime membership, gives you unlimited streaming movies and TV shows.
NetFlix, Hulu and Amazon are also spending millions on high quality original content. In May, Hulu announced that it would be tripling its budget for exclusive programs and launching six new shows this year, including the much-buzzed-about reality show parody Hotwives of Orlando, which premiers tonight.
Get an antenna. Today’s antennas aren’t the rabbit ears of your parents’ generation. An HD antenna for your roof or TV set top will cost you about $30 to $100,and you can get local TV channels for free. You won’t get cable programs, but you’ll pick up more than 30 broadcast networks (such as ABC, CBS, NBC, PBS, FOX). And picture quality is even better than cable, says Kagan.
"My job right now is to get you all those horrible movies you want."
There are those who binge watch to avoid work, and then there are the lucky few who binge watch for work.
Netflix recently posted a UK/Ireland-based job listing seeking someone who would be paid to watch TV shows and movies and tag them with genres. While we thought the idea of getting paid to stream shows without having to change out of stretch pants seemed like the best career ever, others worried that spending hours tagging videos ranging from “Gory Canadian Revenge Movies” to “Sentimental Movies About Horses for Ages 11 to 12″ was the fastest way to “occupation-induced madness.”
So we decided to talk to Greg Harty, one of 40 part-time taggers, about what it’s really like to watch Netflix for a living — from the good to the bad to the My Little Ponies.
Netflix hired Harty, 34, in its first batch of taggers eight years ago. “At the time they described it as an experiment,” he says. “It’s one of the luckier gigs I’ve gotten.”
A movie buff who’s worked odd jobs in film, televisions, video games, writing, and software testing, the Los Angeles-based Harty describes his Netflix interview as one of the easiest he’s ever had: “We talked about everything from Casablanca to Predator in the same conversation, which doesn’t happen that often.”
Taggers are asked to watch and rank shows and movies based on a variety of guidelines. “We have a couple hundred different categories (i.e. perilous situations, race against time, darkness of humor, etc.) in which our taggers can dissect content,” spokesperson Betsy Sund says. “Some of the tags are scalar (for level of comedy/action/chase scenes etc) and others are categories of terms we’ve vetted ourselves (including cerebral, light-hearted, rebellious, etc.), while others are specific to characters and/or directors.”
But 1 to 5 ratings abide by an “A for Effort” ideology.
“For comedy it’s about comedic intent rather than if you thought it was funny or not,” Harty said. “If you know a movie is trying to get a laugh for every scene, that rates higher than whether it got the laugh or not.”
Detachment, therefore, is a key ingredient for being a successful Netflix tagger. Harty says a common misconception of his job is he is a “Roman emperor for movies,” giving them a thumbs up or down.
“You need to be objective,” Harty said. “This is never about whether I like a movie, and if I like it, I can’t change the tagging to try to get you to watch it.”
The whole point of the job is to provide users with suggestions that align with their watching preferences, whatever those preferences may be. “You might like what I consider to be horrible movies,” Harty said. “And my job right now is to get you all those horrible movies you want.”
Supervisors will, however, give taggers a heads up if there’s a particularly disturbing movie to watch and ask for volunteers rather than assigning it arbitrarily. And in specific circumstances, like the film Irreversible — which features a graphic rape scene — a supervisor will personally tag it.
Taggers are given assignments on a weekly basis, and while there are some specialists in certain genres and taggers can request to tag a specific movie, Harty receives assignments at random. The weekly time commitment ranges from a couple of hours to eight movies a week, which — barring the world’s Titanics — runs between 16 and 20 hours. Luckily the hours of required watching has not limited Harty’s ability to binge watch. He saw all of Orange is the New Black season two in two days.
A non-disclosure agreement prohibits Netflix taggers from disclosing their salary, although Sund did volunteer that the part-time work’s pay “makes up a percentage of his overall salary.” A 2012 story in the L.A. Times estimated that taggers make “several hundred dollars per week.”
But when watching gets bad, and we’re talking really bad, Harty says that it doesn’t hurt to remember his undisclosed paycheck.
“I come from a blue collar family and watched both of my parents bust their humps every day,” he said. “I’m not going to complain because I have to watch My Little Pony.“
Find the perfect off-season replacement (and learn how long it'll take to watch it)
For regular people, summertime is a happy time: full of sunshine and warmth and good feeling. But for diehard TV fans, the summer can get pretty bleak: all your favorite shows are off the air, and you start to feel like you’re just sitting around wondering why all the meaning has been sucked out of your life. Sure, you could go outside and get some fresh air, or even read a book or two — but that’s silly. Instead, you should spend this summer binge-watching shows that are similar to your favorites from the past year.
With that in mind, we’ve put together a guide to help satisfy your TV needs and tide you over until your shows come back on the air. Plan your binge-watching schedules accordingly.
All the scandal and intrigue and twists — but at a faster pace. Instead of watching Frank Underwood slowly plan out his careful schemes, you’ll watch Jack Bauer taking on terrorists head-on.
Time commitment: High. With just over 200 episodes, fully committing to 24 is no small task.
Where to watch: iTunes, Netflix (DVD only)
Brooklyn Nine-Nine was created by Michael Schur and Dan Goor, both of whom worked extensively on Parks and Rec. The parallels are clear: a workplace comedy featuring an ensemble cast full of wacky weirdos; shenanigans ensue. But Brooklyn Nine-Nine is still finding its footing, and is likely to continue developing a distinct identity.
Time commitment: Low. Just one season! (This one season was enough to earn the series the Golden Globe for Best Comedy Series.)
Where to watch: Hulu Plus
Like Bob’s Burgers, this show was the brainchild of animator and voice actor Loren Bouchard. You’ll notice some direct parallels — some of the characters are voiced by the same actors, for example — but you’ll come to appreciate both shows for their distinct sets of quirks.
Time commitment: Medium. There are four seasons’ worth of episodes, but you’ll still enjoy the show if you pick and choose random episodes.
Where to watch: YouTube, Adultswim.com, Netflix (DVD only)
Both shows come from creator Jenji Kohan and center on wealthy, white female leads who commit crimes. Otherwise, though, there are plenty of difference in the shows’ humor, characters and plot lines. And if you already watched Weeds when it aired, it’s especially interesting to go back and compare it to Orange.
Time commitment: High. Eight seasons, with just over 100 episodes. But you can do it. We have faith in you.
Where to watch: Netflix
They’re both period dramas that take place in the mid-20th century, so they’ve got a similar retro vibe. And as TIME pointed out when Masters of Sex wrapped up its first season, the show often plays out like a more feminism-minded Mad Men. So you get the mid-century hairstyles and costumes you crave, plus a tad more gender equality — and also, more nudity!
Time commitment: Low. If you catch up on the first season quickly, you’ll be able to watch the second season — which just premiered on July 13 — in real time.
Where to watch: iTunes, Showtime
The latest salvo in an ongoing PR battle between the streaming company and the ISPs
Got buffering problems? It’s all Netflix’s fault, says Verizon. The Internet Service Provider published a lengthy blog post Thursday arguing that Netflix’s mismanagement of its video streaming traffic has led to slower speeds for users. It’s the latest salvo in a months-long public relations battle over who should pay for Internet traffic.
Following users’ complaints about slow speeds, Verizon says it studied congestion across many points in its network using a test case in Los Angeles. The company looked at both the point where content is delivered into users’ homes and the interconnection points where transit providers deliver data from content companies like Netflix to consumer-facing ISPs like Verizon. For most content delivered to Verizon’s network, there was no congestion. However, Netflix content approached 100% capacity during peak utilization hours, which can lead to slower buffering speeds for end users.
According to Verizon, Netflix is to blame for this because the company didn’t reserve enough capacity, either through the transit providers or through Verizon directly, to accommodate the massive amount of video traffic it sends out on a daily basis.
“For whatever reason (perhaps to cut costs and improve its profitability), Netflix did not make arrangements to deliver this massive amount of traffic through connections that can handle it,” Verizon said in its blog post. “Netflix knew better.”
Netflix countered in a statement of its own, saying that ISPs are responsible for controlling congestion levels on their networks.
“When Verizon fails to upgrade those interconnections, consumers get a lousy experience despite paying for more than enough bandwidth to enjoy high-quality Netflix video,” a Netflix spokesman said in an email. “That’s why Netflix is calling for strong net neutrality that covers the interconnection needed for consumers to get the quality of INTER-net (sic) they pay for.”
Netflix has been advocating for months that video providers should not have to pay fees to ISPs to deliver their content efficiently (even though Netflix has in the past paid third parties such as Cogent for this service). The streaming service has tried to conflate the issue with net neutrality, arguing that such fees amount to a toll ISPs can use to prioritize certain Web-based services above others. ISPs such as Verizon and Comcast have pushed back, saying that Netflix and its customers should foot the bill for delivering its massive video traffic, not all the subscribers of a particular ISP.
For now, Netflix has agreed to pay both Verizon and Comcast fees to boost buffering speeds for customers. And the streaming service has abandoned an earlier strategy to blame Verizon directly within its app for slow streaming speeds. The Federal Communications Commission will likely be the final arbiter on who is to blame for slow buffering — the agency is currently investigating the dispute between Netflix and ISPs and may provide guidance on the issue when it drafts new regulations for net neutrality later this year.
The web-only network has more nominations than either Fox or Comedy Central
After making television history in 2013 for earning the first ever Primetime Emmy Award nominations for online-only television, Netflix has followed it up in 2014 with 31 nominations. Take a look at a selection of the Emmys that they’re up for.