Holy cow, we’ve fairly the beat for Netflix.
Netflix added practically 2 million new subscribers domestically and round 5 million subscribers internationally in the fourth quarter this 12 months, the firm mentioned at this time. Wall Streets expectations for the fourth quarter fell far beneath that, coming in at 1.38 million and 3.78 million respectively. We’ll tackle the monetary components of the firm additional down, however the actual factor to note right here is that the subscriber numbers for now are what Wall Road actually cares about as a result of it represents the future growth of the firm.
Drilling down additional, it looks like Netflix’s international growth is displaying a fair stronger efficiency regardless that it’s nonetheless investing aggressively in U.S.-based authentic content material. Whereas the firm has began aggressively increasing internationally, it nonetheless has to reconcile its home strategy — creating robust authentic content material — with audiences overseas. These audiences could have completely different tastes or watching patterns, however the firm mentioned the early outcomes of its efforts are optimistic, referencing certainly one of its new exhibits.
“Gratifyingly, our first Brazilian authentic sequence 3%, a sci-fi, post-apocalyptic thriller, premiered as certainly one of the most watched originals in Brazil and performed nicely all through Latin America,” Netflix mentioned at this time. “Furthermore, bucking typical knowledge, tens of millions of US members have watched the present dubbed and subtitled into English, making 3% the first Portuguese language tv present to journey meaningfully beyond Latin America and Portugal.”
However a part of the problem may even be guaranteeing that it has a hefty catalog of content material beyond the authentic exhibits it produces, and Netflix mentioned that it’s focusing on native content material that travels throughout a number of areas like Japanese anime and Turkish dramas. Authentic exhibits can herald new subscribers, however after the binging is carried out there needs to be loads of content material that retains these customers hooked. However as extra individuals subscribe, Netflix can have extra room to construct these partnerships and more and more Netflix can’t be ignored internationally. Netflix mentioned it will make investments $6 billion in content material on a P&L foundation, up from $5 billion in 2016.
Netflix set itself up for an enormous fourth quarter by first, earlier in the 12 months, revising down its third-quarter subscriber growth expectations. It then, after handily beating those expectations, circled and raised the expectations for the fourth quarter for subscribers. That first step again in expectations fearful Wall Road a bit, however then the subsequent beat raised the bar for what the firm anticipated — a breakout fourth quarter.
Certainly, indicators could have pointed to that. In early December, Netflix became the top-grossing iPhone app on the App Store for the first time. Whereas Netflix has been aggressively increasing internationally, continued sluggish home growth has been a theme for the firm for the previous a number of quarters. Netflix’s strategy has been to repeatedly spend money on new authentic content material that’ll proceed to rack up critic awards — and new home subscribers. Netflix additionally added offline viewing in the fourth quarter, which probably additionally helped propel utilization and the reputation of the app on the App Retailer.
And there’s been loads of new home content material. Netflix has numerous new sequence additions to its catalogs like Luke Cage, The Crown and The OA, all of which have been referred to as out in its report as profitable new additions. If it retains bringing in new content material and IP like that, it may well assist proceed to draw new subscribers — specifically in home markets.
Naturally, the inventory is up huge, leaping greater than 9%. It’s a giant leap by any requirements, however for reference, when Netflix final raised its expectations we noticed a leap of greater than 20% and billions of added to the firm’s worth.
The vacations are all the time going to be a essential a part of the 12 months for firms like Netflix. Individuals are getting new units as items like telephones and tablets for the holidays, and Netflix is principally a desk stakes addition to all these units. However the actual spotlight right here is that international growth is actually chugging alongside fairly properly after the firm made a full court docket press by opening as much as an enormous variety of markets overseas final 12 months.
All that being mentioned, there is nonetheless the looming specter of 2017 and doable change in terms of Internet Neutrality. Nonetheless, Netflix says this gained’t have a huge effect on its enterprise going ahead.
“Weakening of US web neutrality legal guidelines, ought to that happen, is unlikely to materially have an effect on our home margins or service high quality as a result of we are actually well-liked sufficient with customers to maintain with ISPs steady,” the firm mentioned in its earnings report. “On a public coverage foundation, nonetheless, robust web neutrality is essential to assist innovation and smaller companies. Nobody needs ISPs to determine what new and probably disruptive companies can function over their networks, or to favor one service over one other. We hope the new US administration and Congress will acknowledge that preserving the network impartial drives job growth and innovation.”
The corporate’s monetary outcomes fell barely above what Wall Road was in search of, arising at earnings of 15 cents per share on $2.48 billion in income. Analysts have been in search of earnings of 14 cents per share on income of $2.47 billion. Whereas 2016 was a rocky 12 months for Netflix, the firm ended on a high note.