Netflix chief executive Reed Hastings.
NETFLIX has posted massive international subscriber numbers, and used the opportunity to poke fun at its TV network haters.
In the streaming service’s fourth quarter earnings report, Netflix CEO Reed Hastings hit out at comments earlier this month by NBC executive Alan Wurtzel.
“The notion that the broadcast model is broken or dying — it really isn’t,” Mr Wurtzel told a conference. “It’s not that people aren’t watching, but [streaming isn’t] replacing broadcast.”
He highlighted stats showing Netflix shows attracted their most prime time viewers during the first week of streaming, with viewership declining in subsequent weeks.
“Everyone goes back to watching TV like God intended,” said Wurtzel.
In his note to shareholders, Mr Hastings said the growth of Netflix had “created anxiety among TV networks and calls to be fearful”.
“Or, at the other extreme, an NBC executive recently said internet TV is overblown and that linear TV is ‘TV like God intended’,” he wrote.
“Our investors are not as sure of God’s intentions for TV, and instead think that internet TV is a fundamentally better entertainment experience that will gain share for many years.
“The challenge for traditional media companies, most of whom see the future pretty clearly, is to use the revenue from Netflix and other SVOD [subscription video-on-demand] services to fund both great content and their own evolution into internet TV networks.
“Seeso, BBC iPlayer, Hulu, CanalPlay, HBO Now, and CBS All Access are the beginnings of these efforts.”
AUDACIOUS EXPANSION
As its US subscriber growth tapers off, Netflix’s internet video service is setting out to conquer the rest of the world in an audacious expansion likely to sway the company’s stock and the prices it pays for TV shows and movies.
The stakes riding on Netflix’s next act came into sharper focus Tuesday with the release of the company’s fourth-quarter report.
Netflix added 1.56 million US subscribers from October through December, slightly below what management had predicted. It marked the second-straight quarter that Netflix’s subscriber gains in the US have disappointed.
But international growth exceeded the company’s projections to give Netflix nearly 75 million worldwide subscribers through December.
Idris Elba in the Netflix original film Beasts of No Nation.Source:AP
Netflix Inc.’s fourth-quarter earnings also exceeded analyst forecasts, helping to lift the company’s stock by more than five per cent in extended trading.
Although most of Netflix’s subscribers are in the US, the overseas markets are now the company’s marquee attraction. The company picked up another four million international subscribers in the fourth quarter to give Netflix with 30 million customers outside the US.
The Los Gatos, California, company expects to add another 4.4 million international subscribers during the opening three months of this year compared with a projected gain of 1.75 million in the US.
“Our high penetration in the US seems to be making net additions harder than in the past,” Mr Hastings conceded in his shareholder letter accompanying the fourth-quarter report.
Netflix’s international ambitions took a quantum leap earlier this month when its service simultaneously debuted in 130 more countries. The service is now in every major market on its overseas agenda with the notable exception of China, where Netflix still must find a suitable partner and satisfy the concerns of government regulators who block the country’s population from watching some content.
Despite its early inroads overseas, Netflix appears to be facing more challenges internationally than it did nine years ago when it moved beyond its DVD-by-mail service and began streaming video to internet-connected devices in the US.
Netflix now must try to secure enough programming catering to the disparate tastes and languages of people scattered across 190 countries while bidding against richer rivals Amazon.com and Alphabet Inc.’s YouTube that also are trying to reel in more overseas viewers to their own video services.
In an effort to gain an edge, Netflix has been investing more heavily in shows such as the award-winning House of Cards and Orange Is The New Black that can only be watched on its service. Netflix will feature 600 hours of original programming this year, up from 450 hours last year.
TV like God intended?Source:AP
But Netflix has been losing the rights in recent years to other popular programming from TV networks Nickelodeon, Starz and Epix.
Wedbush Securities analyst Michael Pachter predicts that trend will continue as other TV networks demand money that Netflix might not be willing to pay, but Amazon probably will.
“Take a cue from the deals that aren’t being done with Netflix,” Pachter said.
“It is a sign that the content providers are willing to walk away and go elsewhere.”
As it is, Netflix already plans to spend about $US5 billion ($7.24 billion) licensing video this year. That’s on top of the more than $US9 billion ($13.03 billion) that the company has already committed to pay to studios by September 2018. The company currently generates annual revenue of about $US7 billion ($10.13 billion) and ended December with $US2.3 billion ($3.33 billion) in cash.
Some analysts believe Netflix won’t be able to pay much more for programming without further raising US subscription prices that have already climbed from $US8 ($11.60) per month to $US10 ($14.50) per month for its standard plan during the past two years.
A price freeze that kept rates at $US8 per month for an estimated 22 million US subscribers expires in May, threatening to trigger a wave of cancellations during the spring and summer.
Netflix’s rising costs for video and expanding into other countries already has pinched its profit margins. Netflix earned $US43 million ($62 million), or 10 cents per share, in its latest quarter, a 48 per cent drop from the prior year.
The uncertainties looming over Netflix has kept its stock in a holding pattern after a searing ascent that turned the company into a Wall Street star.
The shares climbed $US7.31 to $US115.20 in extended trading, in the same range where it stood six months ago. Over the past three years, though, Netflix’s stock has surged to an eightfold increase in value.
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