Netflix value tops $100bn as subscriber numbers surge

Netflix added 24 million customers in 2017, bringing its global total to 117.6 million

Lucas Shaw
Tuesday 23 January 2018 09:41
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Will Smith’s movie ‘Bright’ has helped Netflix subscriber numbers soar
Will Smith’s movie ‘Bright’ has helped Netflix subscriber numbers soar

Netflix surged in late trading on Monday, vaulting past $100bn (£72bn) in market value for the first time to put the video service on a lofty perch with the likes of Goldman Sachs and Qualcomm.

The world’s largest online TV network has reported its strongest year of subscriber growth to date. Netflix added 24 million customers in 2017, bringing its global total to 117.6 million. For the final three months of the year, the Los Gatos, California-based company crushed Wall Street estimates and suggested it will continue to do so in 2018.

While rival media companies merge, fire staff and fret about the future of their businesses, Netflix keeps chugging along, adding customers at home, in Europe and Latin America. Fourth-quarter sales grew by a third to $3.29bn, the company said, while earnings almost tripled from the previous year to 41 cents, meeting estimates.

Netflix will plough all of that and more into new TV shows and movies. The company has said it will spend as much as $8bn on programming this year, and disclosed that it will shell out another $2bn for marketing. Netflix is also dramatically increasing its non-English programming, with plans to release 30 local-language productions in 2018.

The shares rose 8.3 per cent to $246.55 in late trading on Monday. If those prices hold Tuesday morning, it’ll be a new high for the stock, which had gained 19 per cent this year through Monday.

Netflix signed up 8.33 million customers in the fourth quarter, surpassing analysts’ estimates of 6.34 million, thanks in large part to the popularity of the fantasy series Stranger Things and the new Will Smith movie Bright.

That success has inspired Facebook, Apple and Amazon to try their hand at original programming. It has also spurred rivals like Walt Disney to invest more in online services and acquire competitors. Yet Netflix enjoys a head start on all those players.

International territories accounted for the bulk of the subscriber growth and hold the key to Netflix’s future, with additions of 6.36 million topping the 5.05 million average of analysts’ estimates. Netflix said Rodolphe Belmer, the chief executive officer of Paris-based Eutelsat Communications, will join its board.

The US business, where growth had been slowing, also showed vigour. The company signed up 1.98 million new customers at home, up from a year ago and beating analysts’ projections of 1.29 million, according to Bloomberg data.

Netflix churns out a wide range of new shows every month to entice new viewers and keep old ones. In the latest quarter it also released The Crown, the first season of David Fincher’s Mindhunter and its first original German series, Dark.

“In only five years since launching our first original series, Netflix had three of the top five most searched TV shows globally for the second year in a row,” the company said in its letter to shareholders.

Netflix expects to add 6.35 million customers in the first quarter, more than the average 5.18 million projection of analysts. That includes 1.45 million new subscribers in the US.

Splurging on new shows comes at a cost. Netflix will burn through as much as $4bn in cash this year and said it will borrow again. Critical analysts continue to wonder when spending will level off. The company has stayed around the break-even point for most of its existence, but continues to need cash because of lavish spending on programming.

Long-term debt stood at $6.5bn at year end, while long-term content liabilities totalled $3.33bn.

The ability to raise prices could boost Netflix’s profitability in the long term. The company’s October price increase – $1 a month for the most popular plan in the US – had little impact, if any, on growth in the quarter. While a previous increase slowed subscriber gains, this one passed with less scrutiny or media coverage. The most popular plan costs $11.

Bloomberg

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