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Netflix Touts Subscriber Bump from ‘Arrested Development’

Internet video service adds 630,000 U.S. streaming subscribers in Q2; investors send stock lower

Netflix may have pulled in some additional customers with the revival of cult hit “Arrested Development,” but the company’s overall growth in the second quarter wasn’t enough to satisfy investors.

The Internet video subscription company added 630,000 U.S. streaming subscribers in the quarter ended June 30, in line with previous guidance, as execs boasted that “Arrested Development” provided a small but measurable lift in the period.

However, Netflix investors were apparently unhappy with the subscriber metrics — and the company’s forecast of adding 690,000 to 1.49 million domestic streaming subscribers in the third quarter. Netflix’s stock was down as much as 8% in after-hours trading Monday, to $241 per share.

The company had 29.81 million U.S. streaming subscribers as of June 30, up from 29.17 million three months prior. Previously Netflix had expected to end Q2 — historically a weak quarter in the video subscription biz — with between 29.4 million and 30.05 million U.S. subscribers.

“Arrested Development,” which premiered on Netflix in one fell swoop on May 26, “already had a strong brand and fan base, generating a small but noticeable bump in membership when we released it,” Netflix CEO Reed Hastings and CFO David Wells said in a letter to shareholders Monday. “Other great shows don’t have that noticeable effect in their first season because they are less established.”

Netflix would be “delighted to produce a fifth season of ‘Arrested Development,’ if possible, given fan reaction,” the execs said. Imagine Entertainment chief Brian Grazer recently said Netflix was in discussions with the principal thesps on another run of the skein.

Last week Netflix made history by becoming the first Internet video service to receive Primetime Emmy nominations. The company notched a total of 14, including nine for “House of Cards” starring Kevin Spacey and Robin Wright.

For the second quarter, Netflix posted revenue of $1.07 billion and net income of $29 million. During Q2, Netflix’s broad content deal with Viacom’s MTV Networks expired, and MTVN turned around and cut a deal with Amazon for the Internet retailer’s Prime Instant service.

“While the shows from Nickelodeon and Comedy Central came off our service, we introduced several new shows from Disney Jr., The Cartoon Network and The Hub for kids, and great comedies like ‘The New Girl’ from Fox on July 1,” Hastings and Wells wrote.

Some analysts believe investors are overly optimistic about Netflix’s growth opportunities. The company’s recent stock price has reflected an expectation that Netflix will have at least 50 million U.S. streaming subscribers by 2020, according to Bernstein Research analysts. But they project Netflix will reach a “steady state” of 43 million users domestically by the end of the decade, the analysts wrote in a report downgrading the stock to “underperform” last month.

Instead of a usual earnings call, Hastings and Wells were scheduled to host a live webcast on YouTube Monday at 3 p.m. Pacific moderated by BTIG analyst Rich Greenfield and CNBC correspondent Julia Boorstin.

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