Netflix said that it added 5.2 million total memberships, blowing away Wall Street’s estimates of 3.23 million during a historically weak quarter amid the return of marquee content like “Orange is the New Black.”
Anita Balakrishnan of CNBC.com had the news:
Since Netflix’s last earnings report, new seasons of popular series “House of Cards” and “Orange is the New Black” hit the small screen. “13 Reasons Why” also garnered buzz after it was unveiled on the last day of the first quarter.
Netflix’s financial report comes on the heels of the 2017 Emmy nominations, which recognized Netflix series such as “Master of None,” “Unbreakable Kimmy Schmidt” and “Stranger Things” in the company’s 91 nominations.
But the nominations also highlighted the mounting competition in the digital streaming space, as Amazon ramps up content spending, and Apple dips its toe into original content with shows like “Planet of the Apps.” CEO Reed Hastings has told CNBC that Amazon is an “awfully scary” foe.
Seth Fiegerman of CNNMoney reported that most of the new subscribers came from overseas:
The vast majority of new subscribers — more than 4 million — came from its overseas markets. In fact, Netflix’s international subscriber base is now larger than the U.S. for the first time.
The strong growth beat Netflix’s own estimates and caused the stock to spike 8% in after hours trading.
“We underestimated the popularity of our strong slate of content which led to higher-than-expected acquisition across all major territories,” Netflix said in its earnings release.
During the quarter, Netflix released new seasons of its best known original series, including House of Cards, Orange is the New Black and Master of None.
Netflix also debuted new shows like Glow and Dear White People, new movies like Okta and comedy specials from Louis C.K., Tracy Morgan and Hasan Minhaj.
Ben Popper of The Verge reports that Netflix is becoming competitive with traditional movie theaters:
Netflix has already collected a number of Emmy awards, and it has helped shape the kind of programming made by traditional television studios. Now it wants to take aim at the film business. In its letter to investors Netflix wrote, “We understand that our approach to films – debuting movies on Netflix first – is counter to Hollywood’s century-old windowing tradition. But just as we changed and reinvented the TV business by putting consumers first and making access to content more convenient, we believe internet TV can similarly reinvigorate the film business (as distinct from the theatrical business). This year we will release 40 features that range from big budget popcorn films to grassroots independent cinema.”
The company continues to invest heavily in original content, borrowing money to supplement its cash flow so that it can create more programming. Free cash amounted to -$608 million this quarter, compared to -$254 million for the same period a year ago, and -$423 million in the first quarter of this year. The company expects it will have free cash of -$2.0 to -$2.5 billion for the full year 2017. But with the share price near an all-time high, continuing revenue and subscriber growth, and modest profitability, the company sees no reason to stop taking on debt.
