READ: A year ago, Netflix boldly declared that it planned to conquer the global market for streaming television, adding more than 130 countries to its service map. It also promised to start delivering material profits in 2017 after operating at break-even profitability for several quarters. On Wednesday, the company released business results showing that it is on its way to reaching those targets, even as competition accelerates from services like Amazon and Hulu. Netflix added a record 7.05 million streaming members in the three months that ended Dec. 31, up from the 5.59 million net additions in the same period of 2015. That growth, in domestic and international markets, beat its forecast of 5.2 million new members for the quarter. Netflix now has a total of 93.8 million members. Fueling the increase in subscribers was a rapid rise in Netflix memberships abroad. The company said it is learning “how best to match content with audiences tastes around the world.” It added 5.1 million international members in the quarter, and now has 44.4 million members outside the United States, more than than 47 percent of its total membership. Netflix cited its original series “Marvel’s Luke Cage” and “The Crown” as worldwide hits. It said it planned to invest more than $6 billion in content this year, up from $5 billion in 2016. Profits are rising steadily. Net income increased 56 percent to $67 million in the quarter from the same period in 2015. The company projected that profits would reach $165 million in the current quarter, up from $28 million in the period a year ago. “We don’t really believe in hockey-stick businesses, like suddenly we will turn significantly profitable at 200 million members,” Reed Hastings, the chief executive of Netflix, said during a conference call. “We think it is much smarter to grow into that bit by bit.”Competition in streaming television is becoming more fierce and remains a big challenge for Netflix. The company, a pioneer in the market, listed a number of competitors that are encroaching on its turf, including Amazon, which recently announced a global expansion, and YouTube, which leads online video viewing time worldwide. Meanwhile, satellite television
companies and traditional television outlets are pouring more resources into streaming offerings. “In short, it’s becoming an internet TV world, which presents both challenges and opportunities for Netflix as we strive to earn screen time,” Netflix said in a letter to shareholders. Netflix’s stock price is typically volatile on days when the company reports earnings, and Wednesday was no exception. The earnings report sent shares up about 8 percent in after-hours trading. Netflix shares rose about 8 percent for all of 2016, after having surged 135 percent for 2015, as the top performer on the Standard & Poor’s 500-stock index. The company predicted that subscriptions would continue to grow in the current quarter, although slower than in the period last year. It forecast that it would add 5.2 million members, 1.5 million of them in the United States and 3.7 million abroad. It attributed the slowdown to tough comparisons from the same period last year, particularly with the introduction of the service in 130 countries last January. The quarter was the 10th anniversary of Netflix’s streaming service, which began with the vision that internet television would ultimately replace traditional television. But even as Netflix reported its biggest net addition of streaming members in its history, Mr. Hastings was not satisfied standing still. Asked about his ultimate vision for the company during the conference call, he said, “You never want to characterize something as an ultimate vision, because when you get there, there is always more you want to do.” “Think of us as just continuing to iterate on the basic cycle of more content and better product, that combines at a great service at a great price,” he said. “Hopefully, with that we can attract many more people to join Netflix, and then that fuels the whole cycle. So we are just going to lather, rinse, repeat again and again for the next couple of years.”
Questions:
What is their position?
Are there “trade-offs” inherent in their business model
What makes them unique?
Do we see fit across their different activities? Why and how, or not?
