Netflix tops subs forecast
October 18, 2016
Netflix has reported that in it added 0.4 million members in the US in Q3 compared with its forecast of 0.3 million and 3.2 million members internationally versus its forecast of 2 million.
According to the entertainment streaming service, its “over-performance” against forecast (86.7 million total streaming members vs. forecast of 85.5 million) was driven primarily by stronger than expected acquisition resulting from to excitement around Netflix original content.
Additionally, Netflix reports that in the international segment, it exceeded its internal projection for net adds as the acquisition impact of its originals was greater than anticipated across many of its markets.
Netflix reports that it is investing in more content across multiple international markets in Q4 and, as a result, it projects international contribution loss to grow moderately to $75 million (€68m).
For Q4, Netflix forecasts 5.2 million global net adds, with 1.45 million net adds in the US and 3.75 million new members internationally. “Our expectation for a moderate year-over-year decline in net adds reflects the completion of un-grandfathering. “We are pleased with the results thus far as we expect ASP to grow 12 per cent from Q1’16 to Q4’16. Internationally, the initial demand from our launch in Spain, Portugal and Italy in Q4’15 will also affect our year-over-year net adds comparison,” it reported.
“Overall, it seems that Netflix had a good quarter and the impact from the Rio Olympics 2016 has been minimal,” commented Paolo Pescatore, Director of Multiplay and Media, CCS Insight. “For the first time, the company exceeded $2 billion in streaming revenue in a quarter. This is encouraging as it gives the company confidence to invest more in content with a further $1 billion to be spent next year; making it among the big spenders. But we are still concerned with the subscriber growth. Netflix added fewer subscribers this quarter compared to the same period last year; this is despite being available in far more countries. Furthermore its guidance for the fourth quarter is lower than actual net additions the prior year. However, this is typically one of the company’s strongest quarters so it will hope to exceed even its own guidance.”
“These latest results reinforce our belief that new subscribers will come from its overseas business. There’s little room for further subscriber uptake in the US due to the avalanche of competition. However, the US is a proven model for other parts of the world as the company has moved most of its long-standing customers to newer higher priced plans. This clearly shows a strong appetite for its service. However the principal obstacles still remain, such as more investment to secure content rights for each country and how quickly it can become profitable in each market. Partnerships with cable and telco providers will be key in attracting new subscribers.”
According to Haydn Jones, Account Managing Director at Fujitsu’s Media team, Netflix’s ability to increase its subscriber numbers by a “staggering” 21 per cent in the US alone, highlights that the live streaming giant is not losing momentum anytime soon. “Despite fears of stalling growth due to falling shares earlier this year, Netflix’s focus on distinctive user content has reignited its popularity. Top series such as Stranger Things coupled with its on-demand service continue to attract viewers. Additionally it has put concerted efforts into global expansion as a means to tackle slowing US viewing numbers, personalising content to different markets.”
“In order to survive in this competitive climate, it is crucial for media companies to provide distinctive content that takes individual tastes into consideration. Whereas they recognise changing viewing behaviour on a surface level, they often fail to identify in-depth consumer needs.”
“The only way to ensure a comprehensive view of their audience is by investing into data analytics. We live in an on-demand culture, with traditional TV on the decline, thus knowing who likes to watch when and on which channel, is something that every media agency should be aware of at all times.”