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Netflix to follow Emmys coup with 2Q earnings

Michael Liedtke, AP Technology Writer

SAN FRANCISCO (AP) -- Fresh off a breakthrough in TV's Emmy Awards, Netflix Inc.'s Internet video subscription service will take a bow on Wall Street with the release of its second-quarter earnings.

WHAT TO LOOK FOR: The results, due out after the stock market closes Monday, follow a major coup for the Los Gatos, Calif., company. Two series made exclusively for Netflix, the political drama "House of Cards" and a revival of the comedy "Arrested Development," have been nominated for Emmy Awards in marquee categories. It marks the first time that an Internet video production has been honored alongside broadcast and cable TV networks in the competition for best series and acting.

"Arrested Development," resurrected seven years after the Fox network cancelled it, is expected to play a key role in Netflix's performance during the three months ending in June. The company simultaneously released 15 new episodes of the series amid much fanfare over the Memorial Day weekend, an event that management was counting on to reel in more subscribers during a quarter that is traditionally one of Netflix's sluggish periods because of better weather and the start of the summer vacation season.

Netflix predicted it would add as many as 880,000 U.S. subscribers during the second quarter, above the gain of 530,000 customers attracted at the same time last year.

But Wedbush Securities analyst Michael Pachter suspects Netflix fared even better than management anticipated. He thinks "Arrested Development" probably accounted for an additional 500,000 U.S. subscribers by itself. Netflix also unveiled another original series called "Hemlock Grove" during the quarter, helping to lure in even more customers. Pachter thinks Netflix may have added as many as 1.3 million U.S. subscribers during the period. If he is right, Netflix will have about 30.5 million U.S. subscribers.

Netflix will likely have to post an impressive quarter to keep its stock soaring. The shares are now trading around $265, nearly tripling since the end of last year. The stock isn't far from its peak of nearly $305 two years ago, around the same time that Netflix enraged its subscribers with changes in its service that resulted in U.S. price increases of as much as 60 percent for customers who wanted to rent DVDs through the mail and stream Internet video. The shares subsequently fell to a low point of $52.81 last summer before surging again.

In a sign that Netflix must be feeling good about the past quarter, CEO Reed Hastings will discuss the numbers and the company's plans in a live talk-show format that will be streamed live over the Internet beginning at 6 p.m. EDT Monday. The unorthodox video presentation will be hosted by CNBC anchor Julia Boorstin and BTIG Research analyst Rich Greenfield, who will ask questions sent to them through email and Twitter.

Some of the questions are likely to focus on the viewership of "Orange Is The New Black," another original Netflix series released last week. If that series is off to a good start, it could spur even bigger subscriber gains during the current quarter ending in September.

WHY IT MATTERS: Netflix's $8-per-month streaming service is reshaping the entertainment industry, as illustrated by the Emmy Award nominations announced Thursday. The service also is changing the way millions of people watch television, emboldening some subscribers to stop paying for more expensive cable and satellite service. The company's inroads have re-established its stock as a hot commodity on Wall Street.

WHAT'S EXPECTED: Analysts polled by FactSet expect Netflix to earn 40 cents per share on revenue of $1.07 billion.

LAST YEAR'S QUARTER: Netflix earned $6.2 million, or 11 cents per share, on revenue of $889 million at the same time last year.