Netflix Invests in Subscriber Growth

Netflix Invests in Subscriber Growth

Netflix is signing up lots of new subscribers, which means subscription dollars are rolling in. But dollars are rolling out, too, as the company pays ever-rising bills for programming. The cost of programming is higher than subscriber income so far, but investors seem willing to accept meager short-term profits as the company plows revenues into increasing the subscriber base.

April to June is the dreary quarter of the year for the internet video service, but Netflix still managed to add 5.2 million subscribers to its subscriber rolls. It was the company's largest quarterly increase to date. However, even Netflix has a total of 104 million subscribers, the revenue is insufficient to cover programming. Netflix is on the hook for $13 billion for the next three years because of contracts for content.

Netflix earned $65.6 million in the second quarter, but the company did not meet Wall Street's expectations for net income. The estimated net income surveyed by Zacks Investment Research is 16 cents per share. As reported by the Los Gatos, a California-based company, Netflix fell short with just 15 cents per share.

In terms of revenue, Netflix earned $2.79 billion during the quarter. This surpassed Wall Street's expected gain of $2.76 billion. While the Standard & Poor's 500 index rose by 10 percent, Netflix shares increased by 30 percent.

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