Netflix saw record subscriber growth in fourth quarter, fueled by new content
Netflix easily blew past subscription expectations for the fourth quarter of 2017 on the back of solid earnings and revenue, sending shares of the streaming entertainment giant up more than 8% in after-hours trading Monday.
Los Gatos, Calif.-based Netflix added 8.3 million subscribers globally during the period, beating its own guidance of 6.3 million. The company met its earnings forecast of 41 cents per share on slightly higher-than-expected revenue of $3.29 billion.
Wall Street had expected earnings of 41 cents per share on revenue of $3.28 billion, according to analysts polled by Factset.
For the year, Netflix said it added 24 million new memberships, compared with 19 million in 2016. The company reported full-year 2017 revenue of $11.69 billion, up from $8.83 billion in the previous year. Net income jumped to $558.9 million, up from $186.7 million.
Netflix said that 8.3 million new subscribers was a quarterly high for the company. Subscriber growth was fueled largely by original content as well as wider adoption of streaming TV overseas.
The quarter saw the Dec. 22 release of Netflix’s highly touted movie “Bright,” starring Will Smith as a cop living in a dystopian Los Angeles where humans work side by side with fantasy creatures such as orcs and fairies. The film, which reportedly cost at least $90 million, has been a popular draw among subscribers despite scathing reviews from critics. Netflix has already ordered a sequel.
Netflix also debuted the second season of “Stranger Things” during the quarter on Oct. 27. Other shows to drop during the period include new seasons of “Black Mirror” and “The Crown.”
During the quarter, Netflix increased its subscription prices for its standard and premium services. The price for a standard monthly subscription rose by $1 to $10.99, while the premium rate rose $2 to $13.99.
Subscribers spent more time watching Netflix in 2017, with average streaming hours per membership rising by 9% year over year.
Netflix projects it will spend $7.5 billion to $8 billion on content in 2018, up from $6 billion in 2017. The company’s heavy spending has meant that it has had to borrow billions of dollars.
For the fourth quarter, Netflix’s content obligations — current and future costs for content production, acquisition and licensing — reached $17.7 billion.
The streaming giant said Monday that it took a $39-million noncash charge in the fourth quarter for “unreleased content we’ve decided not to move forward with.” It didn’t elaborate on the unreleased content. During the quarter, Netflix announced that it would not release a Kevin Spacey movie in which the actor plays Gore Vidal.
Netflix also halted production of the sixth season of “House of Cards” after news about Spacey’s alleged misconduct surfaced.
An $8-billion annual content spend would put Netflix well ahead of rivals Amazon, Hulu and HBO.
But Netflix will face fresh competition from Walt Disney Co., which is expected to launch its own streaming services in 2019. Disney’s acquisition of most of 21st Century Fox means that its new entertainment service will probably feature movies and TV shows from both Disney’s and Fox’s vast libraries.
Netflix shares closed at $227.58, up $7.12, or 3.2%.
UPDATES:
6:10 p.m.: This article was updated with information about Netflix’s $39-million charge for unreleased content.
4:15 p.m.: This article was updated with additional details.
This article was originally published at 1:35 p.m
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