Netflix Let The Cat Out Of The Bag Early Via Press Releases

Jul.23.12 | About: Netflix, Inc. (NFLX)

I'm going to make this article quick. I'll show information that suggests Netflix, Inc (NFLX) has revealed an updated (albeit rounded to the nearest million) subscriber count prior to this quarter's results.

On April 23 Netflix released its 1Q earnings results and in the press release was the following statement:

About Netflix, Inc.

With more than 26 million streaming members in the United States, Canada, Latin America, the United Kingdom and Ireland, Netflix, Inc. [Nasdaq: NFLX] is the world's leading internet subscription service for enjoying movies and TV series. For about US$7.99 a month, Netflix members can instantly watch unlimited films and TV episodes streamed over the internet to PCs, Macs and TVs. Among the large and expanding base of devices streaming from Netflix are the Microsoft Xbox 360, Nintendo Wii and Sony PS3 consoles; an array of Blu-ray disc players, internet-connected TVs, home theatre systems, digital video recorders and internet video players; Apple iPhone, iPad and iPod touch, as well as Apple TV and Google TV. In all, more than 700 devices that stream from Netflix are available. For additional information, visit www.netflix.com. Follow Netflix on Facebook and Twitter.

SOURCE Netflix, Inc.

On May 2 Netflix sent out a press release for the United States, Canada and Latin American Markets that contained the same statement.

On May 9 Netflix sent out a press release for the United States, Canada and Latin American Markets that contained a different statement with the subscriber count lowered.

About Netflix:
With more than 25 million streaming members in the United States, Canada, Latin America, the United Kingdom and Ireland, Netflix, Inc. is the world's leading internet subscription service for enjoying movies and TV programs. For about US$7.99 a month, Netflix members can instantly watch movies and TV programs streamed over the internet to PCs, Macs and TVs. Among the large and expanding base of devices streaming from Netflix are the Microsoft Xbox 360, Nintendo Wii and Sony PS3 consoles; an array of Blu-ray disc players, internet-connected TVs, home theatre systems, digital video recorders and internet video players; Apple iPhone, iPad and iPod touch, as well as Apple TV and Google TV. In all, more than 800 devices that stream from Netflix are available. For additional information, visitwww.netflix.com. Follow Netflix on Facebook and Twitter.

SOURCE Netflix, Inc.

On July 3rd Netflix sent out a press release for the United States that again contained a different statement, this time showing a higher subscriber count.

About Netflix, Inc.
With more than 26 million streaming members in the United States, Canada, Latin America, the United Kingdom and Ireland, Netflix, Inc. is the world's leading Internet subscription service for enjoying movies and TV programs. For about US$7.99 a month, Netflix members can instantly watch unlimited movies and TV programs streamed over the internet to PCs, Macs and TVs. Among the large and expanding base of devices streaming from Netflix are the Microsoft Xbox 360, Nintendo Wii and Sony PS3 consoles; an array of Blu-ray disc players, Internet-connected TVs, home theatre systems, digital video recorders and internet video players; Apple iPhone, iPad and iPod touch, as well as Apple TV and Google TV. In all, more than 800 devices that stream from Netflix are available. For additional information, visit www.netflix.com. Follow Netflix on Facebook and Twitter.

SOURCE Netflix, Inc.

On the same day Reed Hastings congratulated Ted Sarandos on his Facebook (FB) page revealing that subscribers had streamed more than 1 Billion hours in the month of June.

Reed Hastings 1 Billion Hours streamed in June

Conclusion:

Apparently, the news that 1 Billion hours had been streamed in June, moved the stock dramatically. I believe that it was the subscriber number in the press release that actually provided the impetus for this move. Either way, if this entire situation isn't shady I don't know what is. Today, (July 23, 2012) another press release came out with the same subscriber count this time omitting the word "unlimited". This is likely inconsequential but might be of note should they decide to limit streaming and introduce tiered pricing.

As always anything can happen with Netflix after earnings. I have a feeling that come Wednesday morning the stock will be up considerably as a subscriber growth signal seems to have been given rather clearly. I am short, and will build my position at a discount should the stock appreciate in value. I remain convinced that without a major change in their business model and with increased competition on the way, Netflix will be squeezed into the backseat like too many passengers in a Fiat 500.

Disclosure: I am short NFLX.

Additional disclosure: I am short NFLX via Long Put options