Netflix subscriptions soar as pay TV dies
THE future of television just got a little clearer.
An hour after Comcast said its Esquire cable network would shut down, a sign of flagging interest in traditional pay TV, Netflix reported its biggest quarter ever, beating analysts’ estimates on new subscribers and validating its vision of a world where everyone watches TV online and on-demand.
Netflix signed up a record 7.05 million customers in the fourth quarter of 2016 to cap the biggest year in company history, according to a statement on Wednesday.
The world’s largest paid video service added 19 million customers worldwide in 2016 after expanding to more than 190 countries, reaching everywhere but China, North Korea, Syria and Crimea.
The shares soared as much as 9.6 percent to $146 (R1 985), an all-time high.
The rapid growth of global, online TV services is challenging many of the world’s largest media and telecoms companies to adapt to a new world in which more people spurn the traditional $85-a-month cable subscription and spend less time watching live TV.
“The amount of destruction that’s going to happen within traditional TV creates a virtuous cycle for Netflix,” said Tony Wible, an analyst with Drexel Hamilton who recommends buying the stock. Netflix chief executive Reed Hastings outlined this cycle after reporting fourth-quarter earnings rose to 15 cents a share from 10c a year ago, beating Wall Street forecasts. Sales grew 36 percent to $2.48 billion.
The more people used Netflix, the more money the company spent on shows, leading to favourable reviews and more users, he said. And after 20 years of operating near breakeven, and spending every spare cent developing programming or marketing the service to new subscribers, Netflix finally expects to deliver material profit.
The company forecasts earnings of $165 million, or 37c a share, for the first quarter. That’s almost double analysts’ estimates of 19c and would be the company’s biggest profit ever. International markets, long a source of losses, would begin contributing to earnings, too, the company said. The popularity of the period drama The Crown, about a young Queen Elizabeth II, along with new seasons of Gilmore Girls and Black Mirror helped Netflix lift its total online customer base to almost 94 million.
Gilmore Girls, a reboot of a show that aired on TV from 2000 to 2007, was one of the 10 most popular shows in every market, Netflix said. The company also released its first original Brazilian series, 3%.
How many people watch any given Netflix show remains a mystery since the company does not offer concrete data.
However, it does call out particular successes, like a new season of the sci-fi show Black Mirror. Netflix programmes accounted for five of the 10 most-searched TV shows of 2016.
Netflix would release 42 titles up to the end of the quarter, officials said. – Bloomberg