Wednesday, 20 January 2016

Netflix has 75m subscribers, is available to 550m broadband homes

"In the fourth quarter, we added a record 5.59 million members as our big shows such as Narcos and Marvel’s Jessica Jones helped us grow membership to 74.76 million. This 5.59 million compares to a
forecast of 5.15 million and to prior year net additions of 4.33 million. For Q1, we are forecasting 6.10 million net additions vs. prior year of 4.88 million. On earnings, we stayed profitable in Q4 despite foreign exchange headwinds, and delivered operating income of $60m and net income of $43m. We expect similar modest operating income results for Q1, assuming current foreign exchange, as we invest in our international expansion. As a reminder, the guidance we provide is our actual internal forecast at the time we report, and we strive for accuracy in our guidance.
In September, we launched in Japan, followed by Spain, Portugal and Italy in October. We are very
pleased with the first few months of membership growth in these markets. Our international
contribution loss of $109 million in Q4 increased sequentially due to these launches. We anticipate Q1 international losses of about $114 million.
In early January at CES, we announced the availability of Netflix everywhere in the world except China.  Pricing is comparable to our existing plans and we have added support for Korean, Arabic, and Simplified & Traditional Chinese languages. Our move into 130 additional countries broadens our addressable market by 190 million broadband homes, on top of the 360 million we counted at the end of 2015 .
While the opportunity is large, our growth in these new markets will unfold over many years as we
improve our service. We are starting by primarily targeting outward‐looking, affluent consumers with
international credit cards and smartphones. As with every market we’ve launched, our approach is to
listen, learn and improve rapidly, adding more content, additional languages and a better Netflix
experience over time. Our global availability sets us up for continued growth for many years and we
continue to expect material global profits beginning in 2017.
In the US, we ended 2015 with nearly 45 million members, although our Q4 US net adds were down year over year, as expected (1.56m actual versus 1.90m prior year). Our high penetration in the US seems to be making net additions harder than in the past. Our forecast for Q1 US net additions is 1.75m, against a prior year actual of 2.28m. New credit/debit card rollover continues to be a background issue. In Q2 and Q3, we’ll be releasing a substantial number of our US members from price grandfathering on the HD plan and they will have the option of continuing at $7.99 but now on the SD plan, or continuing on HD at $9.99 a month. Given these members have been with us at least 2 years, we expect only slightly elevated churn. Our 2020 US contribution target remains at 40% and we are already at 34%."
Source:  Netflix Q4 2015 earnings letter, 19th January 2016

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