Led by Stranger Things and Narcos, Netflix reports record revenue

Netflix reported its third quarter earnings today. The company took in a record best $2.15 billion in revenue, a jump of 36 percent over last year. It also added 3.6 million new subscribers, easily besting the 2.3 million it had projected. The company attributed it's better than expected performance to the break out success of its original content, specifically Stranger Things and the second season of Narcos. It's stock was up nearly 20 percent in after hours trading.

Netflix was one of the best performing stocks of 2015, powered in large part by its stellar subscriber growth. That momentum came to an end last quarter. The company had projected membership would grow by 2.5 million new subscribers, but second quarter earnings revealed slightly under 1.7 million new members signed up. Membership growth in the US, where 58 percent of the company's paid subscribers live, was particularly weak. This segment grew just 2 percent between June of 2015 and 2016, the lowest rate of subscriber additions in the United States since the company began reporting numbers in 2012."We are growing, but not as fast as we would like or have been," the company said in its Q2 letter to investors.

In a letter to investors, Netflix said failure to reach its projected subscriber growth was due to older members leaving the service, or "churn." To combat subscriber saturation in its domestic market, Netflix has been aggressively pushing into new territories. The company announced expansion into 130 new countries, markets with hundreds of millions of customers that until recently had no way to sign up for Netflix. That may help it to bolster subscriber growth, but it won't boost the bottom line. Executives have warned international markets are not likely to become profitable for several years.

Content has be one factor analysts pointed to when explaining why Netflix was losing customers to churn. The company has been focusing on producing original television content and its collection of popular movies has suffered as a result. The service has focused on creating original content instead, expanding production to more than 600 hours of new shows this year. This quarter should put those worries to rest, as the company managed to easily outperform expectations by attracting new customers to show like Stranger Things, which was a cultural phenomenon over the summer.


SHARE THIS
Previous Post
Next Post