Net­flix sub­scrip­tions soar as pay TV dies

The Star Early Edition - - LETTERS - Lu­cas Shaw

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.

Profit fore­cast

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

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