Netflix Q2 shines through downturn

Consumers are turning to rent-by-mail videos in ever-higher numbers -- perhaps to keep themselves entertained as they while away their long stints of unemployment (there's never anything good on during the day!) -- and Netflix is benefiting. The company reported second quarter earnings this afternoon, beating analyst expectations; though investors saw a tale of woe thanks to competition from standalone DVD rental kiosks and free online movies and TV. In Q2 2009, Netflix (NFLX) earned 54 cents per share, or $32.4 million, up 22% from 42 cents per share, $26.6 million, a year earlier; and compared to analyst consensus of 50 cents per share. But in after hours trading, investors said "meh," sending the stock down 26 cents from its close of $46.46, which had been a gain of $1.18, or 2.61%.

Subscriber acquisition cost was down significantly ($23.88 per gross subscriber acquisition, compared to $28.89 for second quarter 2008 and $25.79 in the first quarter 2009), although the churn rate was up slightly, to 4.5% from 4.2% in both Q2 2008 and Q1 2009. Also, revenues were a bit under expectations, $408.5 million compared to consensus of $409.7 million. And all evidence points to the obvious story: consumers are staying home, avoiding pricey trips to the theater and eating out, watching movies on Netflix and, as CEO Reed Hastings said in the analyst call, engendering "strong growth" in the streaming subscriptions.