Netflix continues to grow, adding 5.3 million net subscribers during the third quarter.
And it’s willing to spend the money to continue that trajectory, with a new content budget of between $7 billion to $8 billion for next year. The figure is up from the $7 billion figure chief operating officer Ted Sarandos previously said to Variety.
“While we have multi-year deals in place preventing any sudden reduction in content licensing, the long-term trends are clear,” the company said in a letter to shareholders. “Our future largely lies in exclusive original content that drives both excitement around Netflix and enormous viewing satisfaction for our global membership and its wide variety of tastes.”
Netflix latest earnings report beat analysts’ estimates, mostly on the back of its high number of subscription additions. The company reported earnings on Monday after the bell. Shares were up more than 2 percent during after hours trading after earnings posted.
- Revenue: $2.98 billion vs. $2.97 billion expected Thomson Reuters consensus estimate
- EPS: 37 cents per share vs. 32 cents per share, adjusted, according to a Thomson Reuters consensus estimate
- Subscriber net ads: 5.3 million versus 4.5 million, according to a Street Account estimate
The company now has about 109.3 million subscribers globally. Netflix said it added 850,000 subscribers in the U.S., ahead of the 810,000 Street Account estimate for the quarter. It boomed internationally, signing up 4.45 million subscribers versus the 3.69 million Street Account estimate. The subscription additions were up 49 percent year over year.
Analysts projected Netflix would post strong earnings, including a large number of new subscribers despite some subscription plan rate hikes. The stock price hit over $200 for the first time on Friday.
The company also issued guidance for the next quarter. The company also said it will spend $7 billion to $8 billion on content next year, up from the $7 billion. Netflix chief financial officer David Wells said during an earnings call the robust numbers were due to the pricing plan increases, the upcoming slate and the fact Q4 was strong for the company in 2016.
- Q4 revenue: $3.27 billion versus the $3.15 million Thomson Reuters estimate
- Q4 EPS: 41 cents per share vs. 33 cents per share, adjusted, according to a Thomson Reuters consensus estimate
- Q4 Subscriber net ads: 6.3 million versus 6.25 million, according to a Street Account estimate
It will face stiffer competition as more companies enter the streaming space and more media companies decide to pull their content to create their own services. Disney will pull its movies from Netflix in 2019 to launch its own platform.
However Netflix is hoping it sell media companies on the idea it can bolster audiences for its existing shows. For example, CW’s “Riverdale” saw 400 percent audience growth from season 1 to season 2 after the show appeared on Netflix’s platform between the seasons according to Netflix.
In addition, as deals run out Netflix is ramping up its own original content, chief content officer Ted Sarandos pointed out on an earnings call. During Q3, Netflix announced it signed showrunner Shonda Rhimes to an exclusive overall deal as well as completed its first acquisition, comic book company Millarworld.
Next quarter the company will release its first original Italian and German shows, as well as new seasons of “Stranger Things” and “The Crown.” It will also debut its second David Fincher series “Mindhunter.” Fincher is an executive producer on “House of Cards.” In addition, the David Ayer movie “Bright” starring Will Smith will be released on the platform in December. Netflix reportedly paid $90 million for the Ayer film, according to Deadline.
Source: CNBC
