When Netflix released its second quarter earnings back in July, it was greeted with a lot of caution mainly because of its miss in number of new subscribers in the United States and internationally. At the time, they added about 1.68 million (160,000 in the U.S. and 1.52 million overseas) versus 2.50 million expected and that was a miss that investors didn’t welcome. But in the same report, they said they expected the next quarter reports to be stronger and that’s what happened.
They had a string subscriber growth and posted huge earnings and actually beat its own and Wall Street’s expectations. They added 3.2 million new subscribers internationally and another 370,000 in the United States. They had expected 304,000 new subscribers in the US and another 2 million international subscribers. Well some have attributed this to the hit series “Stranger Things” (a Netflix original drama) which has received some really high ratings. It clocked a 14.07 million views in the United States in the key adults 18-49 demographic in its first 35 days beating other Netflix hit shows like House of Cards.
With this, Netflix now has 86.7 million subscribers.
With respect to actual figures, they were worth $10b more as at yesterday. Total revenue was $2.3b versus $2.16b expected- Wall Street was expecting $2.28b. Netflix earnings stood at 12 cents, and profit of $52 million, surpassing projections of 5 cents.
Netflix is expected to announce more exclusive shows well into 2017 and subscriber base is expected to increase in future.
International markets are key to Netflix’s operations and it hasn’t hidden that. While the Chinese market still proves difficult to break into due to regulatory bottlenecks other Asian and African markets have continued to show prospects. They’ll continue licensing shows to local partners in the Chinese market for now though.
In a conversation a while back, a friend was telling me of people in Nigeria who now prefer to leverage on the fast growing 4G and other broadband services to stream on demand instead of the monopolist pay TV structure that currently exists in the country. As competition among service providers heat up, it’s expected to eventually crash the cost of internet service which means more people subscribing to services like Netflix. At $9.99/4,500 Naira monthly, it’s quite affordable to most of the middle class in countries like Nigeria and other fast developing countries in Africa. To buttress this, a report by Euromonitor says, consumer spending is expected to grow in major African cities well into the 2020s.
While Netflix may be growing its subscriber base it has local competition even across Africa which offer more streamlined content but with a growing list of exclusives, Netflix is still the leader and could strike such local exclusives in Africa too.
In all, it was a great third quarter for a company that saw its shares tumble about 13 percent to $85.84 in July after it reported less than expected number of new subscribers between April and June 2016. Only 1.7 million new subscribers were added.