Netflix subscribers nearing 100 million

Video streaming service soaring

SAN FRANCISCO Netflix is on the verge of surpassing 100 million global subscribers, a testament to how much the video streaming service has changed the entertainment landscape since its debut a decade ago.

The company will reach that milestone this weekend if its projections are correct. Netflix made the prediction Monday with the release of its first-quarter earnings.

The service added nearly 5 million subscribers during the first three months of the year, and estimated it ended March with 98.7 million customers in roughly 190 countries.

Thank smartphone

Over the past decade, “what really did it for Netflix was the explosion of phones and tablets that allowed people to watch video everywhere,” said Wedbush Securities analyst Michael Pachter.

About 51 million of Netflix’s subscribers are in the United States. By the end of this year, Piper Jaffray analyst Michael Olson expects the majority of the company’s subscribers to be overseas. Netflix ended March with nearly 48 million subscribers outside the U.S.

Netflix CEO Reed Hastings called the 100 million subscriber mark “a good start” in a letter reviewing the company’s first-quarter results.

The understated reaction reflects Hastings’ ambition to build the world’s largest video channel. The company’s progress toward reaching that goal has helped drive Netflix’s stock price progressively higher during the past five years, a stretch that has seen the video service add 72 million more subscribers.

Netflix currently has a market value of about $63 billion. Its stock rose in Monday’s extended trading, even though subscriber growth during the first quarter came in slightly below management forecasts.

Chasing HBO

For all its success, Netflix still has a ways to go to catch up with HBO, the popular pay-TV channel that has served as its role model. HBO has 134 million subscribers worldwide, including viewers paying for an internet-only version of the channel that was inspired by Netflix’s success.

Other cable channels also are offering internet-only options as more viewers, especially younger people, eschew traditional TV packages and subscribe to streaming services instead.

The trend has confronted Netflix with more competition in the battle for household entertainment budgets. Netflix so far has answered the challenge by spending heavily on original shows such as “Stranger Things” and “House of Cards” and selling its service at a relatively low price. Netflix’s subscriptions range from $8 to $12 per month.

“The model works from a consumer perspective because it is such a good value,” Pachter said.

What about prices?

But Pachter and other analysts wonder how long Netflix will be able to hold the line on price as its programming costs rise in tandem with its appeal to a more diverse international audience. Movie and TV studios typically also demand more money as more people subscribe to channels in an effort to make as much as possible off their content.

Netflix expects to spend about $6 billion on programming this year.

Netflix hasn’t given any inkling it will raise prices again. It lost some U.S. subscribers after their rates went up by as much as $2 per month last year.