Netflix on the verge of hitting 100 million subscribers

New domestic members came in at 1.42 million, versus Wall Street forecasts 1.59 million, and Netflix guidance of 1.5 million. On the other hand, the lack of big-budget productions boosted net income.

Until recently, Netflix had competition in the United States only from Hulu, owned by major media companies like Disney, Comcast and Time Warner.

On the subscriber-growth miss, the company's stock fell three per cent in after-hours trading before rebounding a bit but still trading below Monday's closing price.

"The company needs to plan for a future in which its U.S. business is virtually saturated, and overseas growth starts slowing", said Paul Verna, eMarketer principal analyst focused on digital video.

"We have high satisfaction and are rapidly growing in Latin America, Europe and North America", the company said in its letter to shareholders.

Although Netflix is far from a one trick pony, the move of House of Cards from Q1 to Q2 has impacted on operating margins, which rose to 9.7% in the first quarter. Netflix now expects to cross the 100 million subscriber threshold in the second quarter; the company projected that it will have 101.95 million total members at the end of Q2.

Netflix has no interest in getting into the live television streaming game, so is not facing off with services such as PlayStation Vue, DirecTV and YouTube TV, according to executives.

Netflix (NFLX) is estimated to have ~19.0 million subscribers in Europe. "Our focus also is on on-demand, commercial free viewing rather than live, ad-supported programming". "If you own Netflix because you think they are going to add subscribers globally, you're still going to own it".

"We've said previously subsequent seasons of show that are very popular tend to have more impact on the business than introducing brand new IP [intellectual property]", explained Netflix Chief Content Officer Ted Sarandos during the webcast.

Netflix's marketing budget has almost doubled over the past few years from $607,186 in 2014 to a forecast of more than $1 billion this year. In the first quarter, Netflix net subscribers were standing around 1.42M in the US, compared to the consensus estimate of 1.59M and 1.93M in Q4.

Remarkably, Netflix only contributed $43 million in quarterly profit from its worldwide operations despite revenues of more than $1 billion in the first three months of 2017.

  • Jacqueline Ellis