Netflix increased its subscriber base by more than 25% from 6,742,000 at the end of Q2 2007 to 8,243,000 at the end of Q2 2008. Sequentially, the company added 168,000 new net subscribers (1,384,000 gross additions) during the quarter. The company said that 98% of its customer base represent paid subscriptions while 2% or 176,000 people are currently free subscribers.

The firm’s balance revealed that Netflix’ average revenue per user (ARPU) is on a downward curve. Compared to $15.24 of ARPU per month in Q2 2007 and $14.09 in Q1 2008, the ARPU for Q2 was $13.78. Customer churn remained in the 4% range. However, the company appears to have significantly trimmed its expenses to acquire new customers: In Q2 2007, the company spent $44.02 on every new customer; in Q2 2008, the cost was down to $28.95.

Revenue for the quarter was $337.6 million, compared to $303.7 million in the year-ago quarter. Net income climbed slightly from $25.6 million to $26.6 million in the same time frame.