Streaming Success

Streaming success

Many companies are currently in the process of releasing their earnings for the first half of the year, and for many, the news is fairly positive. One particular company has enjoyed steady revenue growth for some time, and its recent Security and Exchange Commission filing is no exception.

During the first half of 2014, Netflix earned $2.61 billion in revenue and $227 million in operating income. That’s a substantial increase from the $2.09 billion in revenue and $88.9 million in operating income it generated during the same period last year. A sizeable increase in the company’s domestic subscriber based was the primary driver of this, increasing from 29.8 million in the first half of 2013 to 36.2 million during the same period this year.

The company’s domestic DVD subscriber base didn’t fare as well, however, decreasing from 7.74 million in the first half of 2013 to 6.26 million at the end of June 2014. The consumer trend is clearly shifting away from physical media copy toward the instant availability and convenience offered by its streaming service. Netflix’s future investment spending reflects the reality of this trend, as evidenced by a statement from its latest 10-Q:

“As we grow our streaming segments, we continue to shift spending away from the Domestic DVD segment to invest more in streaming content and marketing for our streaming services.”

While the DVD portion of Netflix’s operations is likely to continue its decline for the foreseeable future, revenue gains from the strength and popularity of its streaming service will likely far outweigh any losses from the foundering business segment.

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