Net­flix’s orig­i­nal shows lure more new sub­scribers in Q1

Bangkok Post - - BUSINESS - LISA RICHWINE LAHAREE CHAT­TER­JEE

Net­flix Inc’s blitz of orig­i­nal pro­grammes at­tracted a sur­pris­ingly high 7.4 mil­lion new cus­tomers from Jan­uary to March, re­as­sur­ing in­vestors who are bet­ting the videostream­ing pi­o­neer’s mas­sive spend­ing will fuel growth around the world.

New shows like Al­tered Car­bon and O Me­can­ismo helped Net­flix smash an­a­lysts’ sub­scriber es­ti­mates, and its bet­ter-thanex­pected sec­ond-quar­ter out­look soothed con­cerns about com­pe­ti­tion from Ap­ple Inc and Ama­zon.com Inc.

Shares of Net­flix jumped more than 7% in af­ter-hours trad­ing on Mon­day to $330.30. The stock is the top per­former on the S&P 500 this year, gain­ing more than 60%.

“I don’t think this is a one-time thing,” said Chaim Siegel, an­a­lyst at Elazar Ad­vi­sors. “It’s very sim­i­lar to the re­sults we saw last quar­ter. It’s get­ting bet­ter.”

Wall Street ex­pected Net­flix to add 6.5 mil­lion new sub­scribers, ac­cord­ing to Fac­tSet data. Net­flix topped that and also said it would bring in 6.2 mil­lion more cus­tomers from April through June, one mil­lion more than an­a­lyst pre­dic­tions.

Net­flix says it will spend up to $8 bil­lion on global TV shows and movies in 2018. As it has ex­panded to some 190 coun­tries, in­vestors ac­cepted neg­a­tive free cash flow in ex­change for the po­ten­tial of out­sized growth in fu­ture years.

“We have big plans for con­tent growth and you should ex­pect that to con­tinue,” chief ex­ec­u­tive Reed Hast­ings said on a post-earn­ings we­b­cast.

In the first three months of the year, Net­flix boosted orig­i­nal pro­gram­ming by 85% from a year ear­lier to a record 483 hours, ac­cord­ing to Cowen & Co an­a­lysts.

The slate in­cluded sci­ence fic­tion se­ries

Al­tered Car­bon and Marvel ac­tion drama

Jes­sica Jones.

Non-English pro­gram­ming also is gain­ing trac­tion, Net­flix said. O Me­can­ismo is on pace to be­come one of the ser­vice’s mostviewed orig­i­nal se­ries in Brazil, and Span­ish-lan­guage heist thriller La Casa de Papel

was the most-watched non-English se­ries ever on Net­flix, ac­cord­ing to the com­pany.

For the just-ended quar­ter, rev­enue grew 40% year-over-year to $3.7 bil­lion, the fastest pace in the com­pany’s his­tory. The av­er­age cost of a Net­flix mem­ber­ship rose 14% dur­ing that time, and cus­tomer ranks swelled to 125 mil­lion.

“Sub­scribers are ac­cel­er­at­ing even at higher pric­ing,” BTIG an­a­lyst Richard Green­field said. “Con­tent spend is hav­ing a di­rect ef­fect on its sub­scriber growth.”

In a quar­terly let­ter to share­hold­ers, Net­flix said it would con­tinue to raise debt as needed to fund our in­crease in orig­i­nal con­tent, adding that its debt lev­els were quite mod­est as a per­cent­age of our en­ter­prise value.

The com­pany’s mar­ket cap­i­tal­i­sa­tion stands at $137.2 bil­lion, more than dou­ble a year ear­lier.

But it faces grow­ing com­pe­ti­tion as tech­nol­ogy com­pa­nies such as Ap­ple and Ama­zon pour money into premium pro­gram­ming, in­ter­na­tional ri­vals jump into stream­ing and tra­di­tional me­dia com­pa­nies pur­sue dig­i­tal cus­tomers.

Walt Dis­ney Co will stop sup­ply­ing new movies to Net­flix start­ing next year and will start its own stream­ing ser­vice for fam­i­lies.

In­vestors have ap­peared bullish on the com­pany’s abil­ity to add more mem­bers.

Net­flix re­cently traded at 93 times ex­pected earn­ings for the next 12 months, ver­sus Ama­zon at 133 times earn­ings and Dis­ney at 17 times earn­ings, ac­cord­ing to Thom­son Reuters data.

Net in­come rose to $290.1 mil­lion, or 64 cents per share, in the quar­ter ended March 31 from $178.2 mil­lion, or 40 cents per share, a year ear­lier.

Rev­enue grew 40% year-over-year to $3.7 bil­lion, the fastest pace in the com­pany’s his­tory.

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