Netflix credits original programming for Q2 subscriber growth

Original programming, especially the highly anticipated return of Arrested Development, spurred Netflix (Nasdaq: NFLX) to greater second quarter subscriber adds--630,000 total--than was traditionally to be expected, CEO Reed Hastings said in a letter to shareholders accompanying second quarter earnings.

Arrested Development

Arrested Development's return helped bump subscriber numbers. (Image source: Netflix)

Noting that net Q2 net additions are generally lower year-over-year due to seasonality factors, this year "was an exception, we believe, due to the launch of Arrested Development" which "already had a strong brand and fan base, generating a small but noticeable bump in membership when we released it," Hastings wrote.

While the 630K number was well down from the 2.03 million the online video service provider added in the first quarter, it was 100,000 more than the second quarter of 2012, Hastings said.

The Netflix boss added that original programming is only one factor in a success story that has driven the total subscriber count to 28.62 million streaming video buyers. That number is expected to climb to as many as 30.1 million by the end of next quarter. While the company did add an $11.99 monthly family plan during the month, "the take rate on this large family plan is minimal," Hastings wrote.

Netflix reported $1.1 billion revenue in the second quarter--up from $889 million year-over-year--and net income of $29.5 billion, up year-over-year from $23 million.

Hastings also pointed out that the competition for subscribers is growing from outside the traditional MVPD space.

"Hulu and Amazon (Nasdaq: AMZN) Prime Instant Video continue to license some exclusive content and develop their own originals," he said, noting that all three services "are becoming more distinct from one another, like HBO, Showtime and Starz are distinct from one another on linear TV."

For the future, Hastings wrote, the company will focus on original programming and improving the streaming experience along with tapping into social interaction among members.

"In Q3, we'll be rolling out our profiles features which will allow households to have distinct 'profiles' for different members or viewing tastes within their home, enabling us to provide a much more personalized experience for our members," he wrote.

For more:
- Netflix issued this letter to shareholders (.pdf)

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