USA TODAY International Edition
Subscriptions to Netflix are selling like hot cakes
Streaming service adds 5.3M new accounts in Q3, zooming past the forecast of 4.4M
Netflix continues to grow faster than predictions, powered by hit series such as Orange is the New Black and House of Cards.
The online-delivered television provider, based in Los Gatos, Calif., added 5.3 million new subscribers from July to September — 850,000 million in the U.S. and 4.45 million internationally. That brings Netflix’s total subscriber base to 109.25 million.
Of those, 104 million are paying customers and the rest are viewers with trial subscriptions.
Netflix had forecast thirdquarter additions of 4.4 million new subscribers, with 3.65 million coming from international markets. But the streaming service provider “continued to benefit from strong appetite for our original series and films, as well as the adoption of internet entertainment across the world,” CEO Reed Hastings said in a letter to shareholders.
While net income of $129.6 million fell short of the $143 million analysts had estimated, revenue came in at $2.99 billion, surpassing expectations by $20 million. Netflix shares Monday rose 3% to a $202.68, a record, and shares rose more than 2% in aftermarket trading.
With the boost in popularity, the company has been able to raise prices. Two weeks ago, Netflix announced it would raise its prices, increasing the cost of its most popular plan (two screens, HD video) by $1 to $10.99 monthly and the $11.99 premium plan (four screens and 4K video) to $13.99.
Current subscribers will begin seeing the monthly price increase this week, while new subscribers began paying it two weeks ago. “Existing members will be notified and their prices will be adjusted on a rolling basis over the next few months,” Hastings said. “Increased revenue over time will help us grow our content offering and continue our global operating margin growth.”
Netflix shows no signs of slowing its drive to create new content to keep subscribers on board. Two months ago, Netflix signed Scandal and Grey’s Anatomy creator Shonda Rhimes to a multiyear production deal. And the streaming provider also acquired comic book publisher Millarworld, home of franchises such as Kingsman and Kick-Ass, and signed filmmakers Joel and Ethan Coen (Fargo) for a western anthology called The Ballad of Buster Scruggs to debut in 2018.
After spending about $6 billion on content this year, Netflix plans to spend $7 billion to $8 billion in 2018.
“We’re very pleased with our progress in transforming Netflix from a service with not just second run content but also mustsee releases,” Hastings said. Programming includes not only Orange is the New Black and House of Cards, but Stranger Things, Fuller House, Making a Murderer, Narcos, The Crown and 13 Reasons Why,
Last year, Netflix added 3.6 million during the third quarter, compared to 1.7 million and 7.1 million in the second and fourth quarters, respectively. Netflix’s growth rate so far this year is up 29% over last year, Hastings says.
This successful third quarter subscriber boost follows Netflix’s record second-quarter growth from the April to June period, during which it added 5.2 million new subscribers, more than 1 million of them in the U.S.
Netflix expects to add 6.3 million more subscribers by the end of the year, slightly down from the 7.05 million added during the fourth quarter last year — the most in a quarter so far.
“The year-over-year growth in (subscriber) adds is remarkable,” said Rich Greenfield, an analyst for BTIG Research.
Netflix’s recent success “portends continued momentum,” CFRA Research analyst Tuna Amobi said in a note to investors Monday. He raised the company’s target price by $35 to $235.
Wall Street seems confident of Netflix’s ability to bypass a dip in subscribers due to the hike. Netflix shares have gone up 6% since the company announced the price increase.