Netflix beats estimates as subscriptions surge
LOS ANGELES— Stranger Things is the gift that keeps on giving for Netflix.
The world’s largest online TV network signed up 8.33 million customers in the fourth quarter, surpassing analysts’ estimates of 6.34 million, thanks in large part to the popularity of the fantasy series. Netflix now has 117.6 million customers worldwide, wrapping up its biggest year for new subscribers. While rival media companies merge, fire staff and fret about the future of their businesses, Netflix keeps chugging along, adding customers in North America, Europe and Latin America. Sales grew by a third to $3.29 billion (U.S.), the company said Monday after markets closed, while earnings almost tripled from a year prior.
Netflix will plow all of that and more into new shows and movies. The company has said it will spend as much as $8 billion on programming this year, and disclosed Monday it will shell out another $2 billion for marketing. The company is dramatically increasing its non-English programming, with plans to release 30 local-language productions in 2018.
Shares rose as much as 9.8 per cent to $249.95 in extended trading, a new high. The stock has gained19 per cent this year and its market value — around $100 billion — was more than four times that of CBS Corp., owner of the most watched U.S. network.
International territories accounted for the bulk of Netflix’s subscriber growth in the most recent quarter and hold the key to its future, with additions totalling 6.36 million to beat the 5.05 million average of analysts’ estimates. The U.S. business, where growth had been slowing, also showed vigour. The company signed up 1.98 million new customers at home, up from a year ago and beating analysts’ projections of 1.29 million, according to Bloomberg data.
Netflix churns out a wide range of new shows every month to entice new viewers and keep old ones. It released new seasons of two of its biggest hits, Stranger Things and The Crown, in the latest quarter.
Splurging on new shows comes at a cost. Netflix will burn through as much as $4 billion in cash this year and said it will borrow money again. Critical analysts continue to wonder when spending will level off. The company has stayed around breakeven for most of its existence, but continues to burn through cash because of lavish spending on programming, financed by borrowing. Long-term debt stood at $6.5 billion at year-end, while long-term content liabilities totalled $3.33 billion.
The ability to raise prices could boost Netflix’s profitability in the long-term. The company’s October price increase — $ 1 a month for the most popular plan — had little impact, if any, on growth in the quarter. While a previous increase slowed subscriber gains, this one passed with less scrutiny or media coverage. The most popular plan costs $11.
Net income for the quarter increased to $186 million, or 41 cents a share, Netflix said, in line with analysts’ estimates. Results included a $39-million charge for unreleased content. During the quarter, the company fired Kevin Spacey from House of Cards and cancelled a planned movie with the actor after he was accused of sexual misconduct. The company also recorded costs associated with currency fluctuations.