Netflix: “Still room for growth”

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Netflix’s 200+ million subscribers, and with seemingly no worries over its future financing, delivered a strong message to both its pay-TV rivals as well as Europe’s important broadcasters.

Netflix, in reporting its Q4 results said its net paid subs addition (8.5 million vs 6 million guidance) was impressive. Total paid streaming subscribers crossed 200 million for the first time in company’s history and helping after-hours trading in Netflix stock rocketing 12 per cent.

CFO Spence Neumann, on the Netflix analysts call, declined to give a full-year target number for subscriber additions: “It’s hard enough to project the next 90 days, let along the next 12 months” – but he said retention is “better than a year ago, and acquisition is strong”.

There’s a lot of room for growth when looking at worldwide regions, Neumann says, even in the US/Canada region it’s at 60 per cent penetration and still growing.

“So, we’re still a very small share of even just pay TV penetration in most markets around the world, and a small share of viewing,” so there’s a lot of “headroom” Neumann added.

Other conference call highlights included:
· Netflix has $8 billion of cash on its balance sheet
· The company is still unclear about adopting a linear transmission model
· APAC region was the second largest contributor to growth
· More than 70 original movies annually are planned
· “Africa has a ton of potential” said co-CEO Reed Hastings

“The accelerating shift towards streaming entertainment is expected to support subs growth across global markets in Q1/21 as well (guidance of +6 million net addition) despite intensifying competition,” said a note from investment bank Exane/BNPP.

“Regarding the broadcasting space we see the increased competition in the SVoD space driven by the US players’ strong differentiation on content depth and marketing firepower as weighing on EU FTAs own DTC plans, leaving us cautious on most European broadcasters’ SVoD plans,” adds the bank’s note.


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