Netflix Reports Strong Growth

Online DVD renter Netflix Inc. on Thursday reported an 82% rise in subscribers in its second quarter, despite a 10% price hike some feared would drive away customers.

The Los Gatos, Calif.-based company said it had 2.1 million subscribers on June 30, up from 1.1 million last year. On April 15, Netflix raised its monthly fee from $19.95 to $21.95, sending its shares down nearly 17%.

Since then, the shares have rebounded as Netflix executives and financial analysts said growth was within the range of forecasts.

This week, Piper Jaffray analyst Safa Rashtchy wrote that “the impact of a price increase is likely to be much better than expected, and the company is likely to produce results well toward the high end of its guidance.”

Shares of Netflix fell 5 cents Thursday to $35.95 on Nasdaq.

In other statistics, Netflix said that of the total subscribers, 97%, or 2 million, were paying clients and 3%, or 69,000, were free trial members. That compares with 96% paying subscribers a year ago and 95% paying clients at the end of 2004’s first quarter.

Household penetration in its home market in the San Francisco Bay Area reached 7.6%, up from 5% last year. Outside the Bay Area, household penetration nationwide was 1.8% compared with 1% last year.

Two key performance measures investors await are churn -- the number of subscriber cancellations compared with new clients -- and subscriber acquisition costs -- the amount Netflix spends marketing to each new subscriber.

Netflix generally provides churn and acquisition statistics with its quarterly earnings report. It has scheduled the second-quarter earnings for July 15 after the market closes.

Netflix has previously said it expects second-quarter churn in a range of 4.9% to 5.9% and subscriber acquisition costs between $34 and $36 per subscriber.