On demand video platform Netflix added 7.05 million subscribers in Q4 2016 taking the total count to 93.8 million subscribers worldwide, with 47% of the subscribers coming from outside the US. The company reported a net income of $67 million for the quarter ended December 31, 2016, up 55.8% from $43 million in the same quarter last year.
In the preceding quarter, the company had a net income of $52 million. The higher profit this quarter is attributed to subscriber increase from the 130 country launch last quarter.
Reed Hastings (CEO of Netflix), David Wells (CFO) and Ted Sarandos (head of content acquisition) in a post-results interview spoke in some length about the company’s strategies. Here are some of the takeaways.
International operations taking off:
Hastings said that the company has grown steadily over the last few years, with additional subscribers coming from the international expansion. “If you do not look at it by the quarter, but you look at it by the year, what we have seen in Latin America, steady growth; Europe as a whole, has been really picking up momentum for us; and Asia, we are just getting started.” He mentions that “we actually broke through into profitability for our consolidated international segment, and we will continue to invest and take that back down through the year.”
Further international expansion:
The company continued to further expand globally, bringing smaller markets like Poland and Turkey under its fold. According to Hastings, “From a near-term subscriber standpoint, it is a background influence, compared to the big established markets in Europe, Latam, and North America. And then of course, over time, they should be quite substantial. But they are long term plays.”
No plans for sports:
The company will add 1,000 hours of content, including over 42 original launches, in 2017. However, it mentions that it cannot compete with cable on sports. “In terms of getting to a full one-to-one tie ratio with today’s cable, that includes a lot of sports, which we do not have and do not have plans for. So you will want to weight that a little bit.”
On owning content vs licensing:
Other than its own original content, Netflix has also tied up with various production companies for shows, as well as for co-producing shows. The company mentions it will continue to invest in both, with each having its own advantage. According to Sarandos, “Original productions has a lot of big scale advantages to the business. Probably the most meaningful one is removing the studio markup and overhead on those productions, and being able to put more of that on the screen. Owning the IP, as we expand into multiple seasons, having control over the windows. And so I lean into both original programming and owned original programming, but we are still a very active buyer of second window content from our studio partners. We are increasingly co-producing some of that programming with networks and studios around the world. Where they will take one country and we will premier the show globally or – at the same time, which takes off some of that risk, and also enhances our partnerships with those networks and studios.”
On being an app on cable:
Last year, Netflix tied-up with Comcast to integrate Netflix into X1, offering the app to Comcast’s cable customers. However, since then, the company has not added other cable operators. According to Hastings, “We have done extremely well focusing on our service as a discrete service, $7.99 a month, and incredible content. And so we are just going to keep pounding that drum as we expand around the world and also here in the US.”
– Net income for the quarter stood at $67 million, up 55.81% from $43 million in the same quarter last year.
– Total revenue came in at $2.35 billion, compared with $1.67 billion in the same period last year. This represented a growth of 40.7%
– Netflix added 7.05 million total net subscribers in the quarter, up from 5.59 million additions in the same quarter previous year.
Watch the earnings interview here