Netflix gains more than 5.3 million new subscribers

The video-streaming service serves up sales beyond analysts’ expectations, thanks to original content releases

Netflix sees its subscribers as hungry for more content. And these viewers are devouring what the internet video-streaming kingpin is serving up.

On Monday, Netflix said “strong appetite” for its original content continued to drive the company’s results during the third quarter of the year, which included Netflix adding 5.3 million new subscribers, to give it 109.3 million subscribers worldwide. Those new memberships topped Netflix’s earlier forecasts of 4.4 million new subscribers for the period.

Prior to its earnings release, Netflix’s shares rose 1.6 percent, to a recordhigh close of $202.68. After the report came out, Netflix shares rose another 1.2 percent in after-hours trading, to $205.16.

“Wall Street loves inflection points,” said Netflix Chief Executive Reed Hastings, on a conference call to discuss the company’s results. “But now, it’s

pretty much steady growth and continuous evolution.”

During its third quarter, Netflix launched the third season of its popular drama “Narcos,” about the cocaine wars in Colombia during the 1980s, as well as the premieres of new, original series such as “Ozark” and “Friends From College.” Anticipation is also growing for the second season of the Netflix program “Stranger Things,” which debuts Oct. 27.

“The way they manage their content release schedule is smart. It’s borderline brilliant,” said Michael Pachter, who covers Netflix for Wedbush Securities. “Their strategy of putting out a new original every week is giving people almost too much to choose from.”

In a statement announcing its results, Netflix left little doubt regarding how it views original programming in relation to its position in the video-streaming industry.

“Our future largely lies in exclusive original content that drives both excitement around Netflix and enormous viewing satisfaction for our global membership and its wide variety of tastes,” Netflix said.

And in order to acquire all that original content, Netflix is going to be ramping up its spending.

“Everyone is going to have their own (video streaming) strategies,” said Ted Sarandos, Netflix’s chief content officer, and the man responsible for deciding what content Netflix will spend its money on. “We have to focus on content people get excited about.”

Already, Netflix has said it will spend $6 billion this year on buying up and producing exclusive and original Netflix programming.

As part of its third-quarter results, Netflix said it will spend $7 billion to $8 billion on content next year and that it has $17 billion in “content commitments” on the books for the next several years.

Such spending levels are a matter of concern for some industry analysts who follow Netflix.

“I don’t think we are very far from a point where investors will start to lose patience with Netflix, and for good reason,” said Clement Thibault, of Investing. com. “Spending money is the easy part, but proving you can grow earnings and margins is an entirely different story.”

In addition to its subscriber figures, Netflix reported a third-quarter profit of 29 cents a share, on $2.99 billion in revenue, compared to a profit of 12 cents a share, on sales of $2.3 billion in the same period a year ago.

Wall Street analysts had forecast Netflix to earn 32 cents a share on $2.97 billion in revenue.

“It was a good quarter; not much surprising,” Pachter said. “I’m cynical about their earnings because their content spending keeps going up. But, overall, the results and outlook look reasonable.”

For its fourth quarter, Netflix said it expects to earn 41 cents a share, on $3.27 billion in revenue.

The company also forecast a gain of 6.3 million new subscribers for the quarter that ends in December.