Despite a slower local market, and some challenges internationally that encompass payment issues and language barriers, Netflix’s next quarter is looking sunny.
The company reported US$1.67 billion in global revenue during its fourth quarter of 2015, resulting in a profit of US$270 million — and it has major subscription gains at home and abroad to thank for that.
Though the California-based SVOD fell short of its US subscriber targets in Q3 (adding less than 900,000 new subscribers and not the projected 1.15 million), the company’s Q4 saw 1.6 million new subscribers added in the US. Globally, Netflix attracted 5.6 million new subscribers, bringing its worldwide total to more than 74 million.
Though the additions were seen as a success compared to the last quarter, Netflix’s net additions were down year over year.
In an investor call, CFO David Wells said the company anticipated net additions would be lighter, noting, “The next 50 million are harder than the first 50 million in terms of growth.”
Despite the local slowdown, Netflix expects its international subscription numbers to grow quickly.
Given Netflix’s recent expansion into 130 more countries, the company expects to grow by more than six million global subscribers by the end of Q1 2016, which will be an acquisitions record. (Available languages, where English isn’t widely spoken, will play a role in the speed of adoption in many of these countries.)
The average subscription price also grew between 4% and 5% worldwide in Q4, with Netflix raising prices a minimal amount for new users in most countries. The report states that in the second and third quarter of 2016, Netflix will release a substantial number of its longtime US customers from price grandfathering. It will offer them the ability to keep their US$7.99 monthly plan, but it will limit access to standard definition content. The other option will be to upgrade to US$9.99 per month for high-definition content.
Netflix’s target for US market penetration in 2020 still remains 40%, and the report states that it is currently sitting at 34%.
In Netflix’s recent high-profile expansion into 130 additional markets (with the notable exception of China), it paired with a number of global and local telcos and electronics companies such as Vodafone, Softbank and LG in order to ease into markets like Japan and Singapore. However, the report identified China as an area of uncertainty.
Content, of course, and original programming remain top priorities for the SVOD.
The final quarter of 2015 saw Netflix launch more original series than ever, with a total of five originals debuting during the period (including Marvel’s Jessica Jones). And the company’s plans for content in 2016 are ambitious, having recently promised 600 hours of original content for the year. With the growth, content chief Ted Sarandos says a focus will be on creating content for all tastes, including multi-camera comedies like the Ashton Kutcher-starring The Ranch or its Full House reboot.
From Stream. With files from Megan Haynes and Wendy Goldman Getzler.