Netflix ends Q2 with 50 million members, survives price hike without blemishes

Netflix (S NFLX) ended the second quarter with a total of 50.05 million subscribers worldwide, up from 37.56 million in Q2 of 2013. The company added 570,000 subscribers in the U.S. last quarter, compared to 630,000 in Q2 of 2013. It now has 36.24 million subscribers in the U.S., up from 29.81 million in Q2 of 2013.
But the bigger growth story was once again international for Netflix: The company added 1.12 million subscribers in its international markets, compared to 610,000 a year ago, and now has 13.80 million subscribers abroad, up from 7.75 million a year ago.
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On the financial front, Netflix ended the quarter with $1.34 billion in revenue from all parts of its business, including the slowly-fading DVD business. In Q2 of 2013, it generated $889 million in revenue. Net income was also up, to the tune of $71 million, compared to $29 million in Q2 of 2013.
But the quarter everyone really was looking to as a comparison was the third quarter of 2011. Back in summer of 2011, Netflix announced that it was splitting its DVD and streaming business, effectively doubling the price for members who were using both. The result was a disastrous quarter. For the first time in its history, Netflix lost subscribers (810,000, to be exact), which was followed by further bad news in the following quarters.
So why is this relevant today? Because Netflix announced its first price increase since the 2011 debacle with its last earnings in April. This time around, the company grandfathered existing subscribers into the old price, reducing the risk of mass cancellations. However, the fact that the company also saw 1.69 million new subscribers across its domestic and international markets also shows that the moderate price increase — new members pay $9 instead of $8 per month for the company’s most popular plan — didn’t really discourage many to sign up. Or as CEO Reed Hastings and CFO David Wells put it in their earnings letter to shareholders:

“There was minimal impact on membership growth from this price change. “

Other highlights from the shareholder letter, which the company frequently uses to announce new initiatives:

  • Netflix will introduce in-store gift cards in the U.S., Canada, Mexico and Germany later this fall. This should help the company reach consumers without access to credit cards.
  • The decline of Netflix’s DVD business is actually slowing: The company still has 6.3 million DVD subscribers. 391,000 cancelled their DVD subscription this quarter; in Q2 of 2013, 475,000 members said goodbye to the physical disc.