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Netflix Crushes Sub Growth Projections, Stock Soars

18 Jan, 2017 By: Erik Gruenwedel

CEO Reed Hastings, in the earnings webcast, says he hopes Netflix reaches 99 million subs in Q1

When Jerry Seinfeld wants in on Netflix, the subscription video pioneer must be doing something right.

The global service Jan. 18 said it added more than 7 million subscribers worldwide, including 1.93 million in the United States and 5.12 million abroad in the fourth quarter (ended Dec. 31, 2016).

The tallies all beat company projections as Netflix ended the year with 93.8 million subscribers — up more than 25% from 74.76 million subs a year earlier. This was Netflix’s largest quarter of net sub additions in its history. 

“Over 47% of our total members are now outside of the U.S. This growth was very broad based geographically as our original content continues to be well-received all over the world,” CEO Reed Hastings and CFO David Wells wrote in the shareholder letter.

That said, international operations generated a $67 million loss on revenue of $948 million, which was down from a loss of $109 million and $566 million in revenue a year earlier. The Q4 loss was less than a projected $75 million loss.

Notably, management anticipates the international segment will slightly contribute profit in Q1 (ending March 31).

Net income in Q4 topped $67 million, up from $43 million during the previous-year period. Revenue exceeded $2.35 billion compared to $1.67 billion a year earlier.

The service said it would bow the fifth season of original series “House of Cards” in the second quarter rather than around the customary Valentines Day period. Earlier in the day Netflix announced an exclusive license agreement with Seinfeld for new episodes of his "Comedians in Cars Getting Coffee" series, in addtion to separate stand-up shows. 

Meanwhile, by-mail disc rental revenue topped $126.4 million on 4.1 million subscribers, compared with $144.7 million and 4.7 million subs a year earlier. The segment continues to drive Netflix’s bottom line, generating 54% of the company’s contribution profit at $68.2 million.

Not surprisingly, the Los Gatos, Calif.-based company’s stock skyrocketed, up more than 8% at around $144 per-share in after-hours trading. 

Yet, Hastings and Wells, in the letter, reiterated growing domestic and global competition, including the BBC recently announcing it would make binge-viewing available on all new TV series.

“We presume HBO is not far behind the BBC. In short, it’s becoming an Internet TV world, which presents both challenges and opportunities for Netflix as we strive to earn screen time,” they said.

About the Author: Erik Gruenwedel

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