The post-results analysis for Netflix, following on from their Q1 numbers, are extremely positive. Michael Nathanson, from MoffettNathanson Research (MNR) summed up the position accurately: “The company’s upside surprise on subscribers in the quarter came in +10 per cent stronger than the historical averages of prior Q1 beats. As Netflix called out, the bundles and partnerships ‘have proven to be very successful’ and we believe they will remain a contributor to subscriber growth. This is expected to continue in Q2 due to a new partnership with Sky and the deepening of the Comcast relationship.”
Indeed, MNR looked at their slide rules and said that the growth curve would continue through Q2, saying that the current “free” subs offer to select customers of T-Mobile, Verizon FiOS and Altice (Cablevision) in the US will continue to propel growth. MNR said that the solid numbers for Q1 did not affect its expectation that Netflix will continue to do well in the US for the next 4 to 5 years adding roughly 5 million net paid subs per annum over this period.
As far as the rest of 2018 is concerned MNR expects to see Netflix add 6.5 million overall and another 3.6 million from its international operations.
Josh Krichefski, CEO at MediaCom in his overview, said: “The likes of Netflix and Sky’s Now TV have completely changed how we view our favourite TV shows and films. But it’s short-sighted to think that the reason for increasing subscriber figures is purely about a convenient platform. The ease of being able to watch the latest episodes of shows like Westworld from your mobile is a selling point – meeting the needs of a digital society. But ultimately, retaining viewers and maintaining long-term success is still all about the content itself. The winner in today’s media landscape will be the one that commissions or creates the most engaging, gripping and refreshing programming.”
“Viewers that use Now TV, Netflix and/or Amazon Prime are likely to do so because the content has attracted them. On-demand and live TV isn’t an either-or argument, it’s about viewers accessing unmissable programming – irrespective of the channel they use to do it. In short, great programming isn’t defined by the platform but by its ability to make us drop everything and pay attention to the screen,” he added.
Clive Malcher, SVP/Commercial at Piksel, says he wasn’t totally surprised by the Netflix numbers. “Netflix’s Q1 subscriber growth shouldn’t be very surprising. With a steady stream of original shows, Netflix is reaping the benefits of putting the consumer first. Netflix shows no sign of slowing down, as it plans to invest $7.5 to $8 billion in content this year, showing just how dedicated the provider is to offering original content to its audience. However, Netflix’s leadership position is by no means guaranteed. Rival services are becoming increasingly popular and the spectre of Apple’s planned entry into the streaming space could be Netflix’s toughest challenge to date. However its strategy looks solid: prioritising growth, retaining ownership of its audience and platform, investing in original, international content and supplementing that content with the rights to popular shows. Its direct competition with Disney, Amazon and ultimately Apple, will see players within the OTT streaming industry dig deep to drive subscriber numbers and deepen relationships with customers.”
Gareth Hollis, from investment bank Exane/BNPP, was also positive. “We don’t take any view on Netflix share price & expectations but would highlight that Netflix growth is far from over: it delivered +40 per cent growth in streaming revs and is now growing ARPUs double digit whilst the subscriber base penetration still low globally. Though the company sees competition from tech giants (Apple, Amazon) and some traditional media companies, Netflix has the head-start which no other rival has in internet TV. We calculate that on a cash basis, Netflix will spend circa $12 billion this year making it the biggest spender in the world after Disney. To put this in context, Netflix will spend roughly as much in 2018 than all more listed European broadcasters will.”