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Tension runs high as Netflix reports on subscriber growth

July 22nd, 2013 at 2:30 PM

This afternoon, Netflix will report its spring quarter numbers and investors are on edge. Netflix’s share price has soared from $53 to $263 in one year, triggering muttering about a bubble. Over the past six months, the company has been able to generate massive media attention by its original shows House of Cards, Arrested Development and Orange is the New Black. Many analysts claim that these shows do not need to pull in new subscribers; if they manage to bring down churn and increase customer loyalty, they will justify the considerable production costs.

Nevertheless, Wall Street is now focused tightly on Netflix subscriber growth, with RBC Capital markets expecting nearly 39 million global subscribers at the end of the June quarter. That would require more than 7% growth from the March quarter. After the recent share price surge, there is little room for disappointment. One challenge Netflix faces is expanding its United States base from high-income, highly educated, urban households to regular middle class consumers. The current crop of original shows definitely have an elitist flavor: Arrested Development is a cult hit that was canceled by Fox after its audience dropped below 4 million, for example. It’s not clear that these shows are pulling in new subscribers at this point, though when Netflix’s library of content expands, they could have an impact as a group.

We could well have some fireworks in the after market trading tonight.




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