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Netflix's original programs drive surge in new customers

The streaming-TV company credited its own TV shows, including "Orange Is the New Black" and "Sense8," for strong US and international growth.

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Netflix founder and CEO Reed Hastings has big plans for making his company a major TV player both in the US and abroad. Michael Kovac/Getty Images

Netflix has been using an ever-growing library of original programs and an aggressive international expansion to lure new customers to its streaming-media service. The results from the latest quarter show the company's roll hasn't stalled.

Los Gatos, California-based Netflix on Wednesday reported 3.28 million new subscribers in its second quarter, easily beating its own projection for 2.5 million new subscribers. Most of those new customers were in Netflix's international markets.

Shows like "Orange Is the New Black," "Sense8" and other original series "differentiates our service, drive enjoyment for existing members and help motivate consumers to join Netflix," the company said in a statement.

Investors liked what they saw: Shares surged about 10 percent in after-hours trading.

The company has been able to keep up with ambitious expansion plans as it transitions from its origins as a by-mail DVD rental company and becomes a major provider of streaming television programming. But many traditional TV companies, including HBO, Dish and CBS (CNET's parent company) are now offering their own streaming services in the US, putting more competitive pressure on Netflix. And rival Amazon offers a similar service. Reed Hastings, Netflix's CEO, often claims these new players in Netflix's territory are a benefit, saying they help bring more customers into the fold of streaming video and growing the pie for Internet TV services.

Netflix's US subscriber base has become so large, in fact, that the company has trouble maintaining that growth. To amp up the pace, Netflix is expanding abroad and spending more attention on splashy original programs, including "House of Cards" and "Orange Is the New Black."

While many major Netflix series premiered earlier this year -- including the newest seasons of those two programs -- the second half of 2015 now looks to include fewer big draws. For the current quarter, Netflix will introduce "Wet Hot American Summer: First Day of Camp," a prequel series to the 2001 comedy, and "Narcos," a series about Colombian drug lord Pablo Escobar.

Time will tell whether all these new series will continue to attract more members. Netflix expects to bring in 3.55 million more members in the current quarter, with most again coming from international markets.

On the global front, Netflix plans to come to Japan in the third quarter, then Spain, Italy and Portugal in the fourth quarter. Further expansion is slated for next year, with Netflix still exploring its options in China, though Hastings has cautioned that its initial investment there will be modest.

For the June quarter, Netflix reported a profit of $26.3 million, or 6 cents a share, down from year-earlier results of $71 million, or 16 cents a share, as the high costs of international expansion tamped down on earnings. Revenue jumped 23 percent, to $1.64 billion.

Analysts polled by Thomson Reuters expected 4 cents a share in earnings and $1.65 billion in revenue.

Netflix added 2.37 million international customers and 900,000 US customers in the latest quarter.

The company started trading Wednesday at a new price to reflect a 7-for-1 stock split. Netflix's split follows other high-flying tech stocks, including Apple and Salesforce.com, by offering a split to make its shares more affordable. Netflix's shares traded Tuesday around $700 each, thanks to the stock doubling in value since the start of the year, making it a top performer in the S&P 500 index.