Netflix’s influence growing globally
Streaming service’s audience internationally now exceeds its reach within the U.S.
LOS ANGELES— Netflix Inc. has begun to reshape the TV business overseas just as it has at home.
The streaming-video provider scored a record second quarter, according to a statement Monday, surpassing forecasts for subscriber growth and boosting its international audience past the domestic total for the first time.
Netflix’s blend of TV shows, movies and standup comedy has started to catch on in some of the biggest countries in the world, from Brazil to the U.K. The company will be in at least 20 per cent of broadband households in five of its largest markets outside the U.S. by the end of the year, according to Instinet.
The streaming-video provider signed up 5.2 million subscribers in the second quarter, two million more than analysts had forecast. The company said 4.14 million of those new viewers came from outside the U.S., bringing the international total to more than 52 million. International operations will be profitable for the first time this year, Netflix said.
The company will spend more than $6 billion on programming in 2017 to offer that global audience a little bit of everything. While most of the budget reflects shows licensed from big Hollywood studios, the company is releasing a dizzying array of new shows and movies of its own, including new series set in Spain, South Korea and Mexico during the quarter.
Shares of Netflix soared as much as 11 per cent to $179.45 (U.S.) in extended trading, showing investors continue to forgive minuscule profits for growth in subscribers, which soared to almost 104 million in the period. The stock is up 31 per cent this year.
All that growth comes at a cost. Net income of $66 million, or 15 cents a share, fell short of the 16-cent average of analysts forecasts, even while up substantially from a year earlier. The company raised another $1 billion in the quarter to fund original programming, and will not be cashflow positive for years to come.
But investors won’t care so long as the subscriber growth continues. The company projects it will add 4.4 million new subscribers in the current third quarter, compared with the 3.96 million average of analysts’ estimates. Netflix forecasts net income of 32 cents a share, on revenue of $2.97 billion. That compared with analysts’ estimates of 23 cents and revenue of $2.88 billion.
For the second quarter, Los Gatos, Calif.-based Netflix signed up 1.07 million U.S. customers, easily beating the 633,000 average of analysts’ estimates compiled by Bloomberg. Total sales grew to $2.79 billion, compared with projections of $2.76 billion.
Having already surpassed 50 million customers in the U.S., Netflix has fixated on adding customers abroad, especially in Latin America and Europe. The company recently opened a customer-service centre in Amsterdam that will employ at least 400 people by next year.
Netflix has promised international markets will be a source of new customers for years to come. Co-founder and chief executive officer Reed Hastings has held up Facebook and YouTube as models for his company. He wants 80 per cent to 90 per cent of the company’s audience to be outside the U.S. — suggesting the company sees a global market of 450 million subscribers or more.
In the second quarter, Netflix released more than 50 new programs, spanning 14 original series, 13 standup comedy specials, nine original films, seven original series for kids, six documentaries and two documentary series. The company doesn’t release viewership figures for any of its programs, though it has called out older shows House of Cardsand Orange Is the New Black as hits in the past.