Netflix Surpasses 75 Million Subscribers
Netflix is the biggest streaming-video subscription provider in the world; simply put they are a provider of Internet TV. Netflix blew past their Wall Street Earnings Estimate for 4th quarter 2015. They signed up more international customers than anticipated by about a million customers. Earnings were quite a bit higher than Wall Street thought. On January 1st, CEO Reed Hastings and CFO David Wells informed investors that Netflix had hit 75 million streaming members. They pointed out that the world loves Internet TV in a big way.
TV rivals continue to criticize, first complaining that viewership numbers are not disclosed, then that Netflix overspends on content. They feel that leasing their programming to Netflix will damage their ratings system and ad money. Netflix does not rate their programming. Hastings pointed out that since Netflix does not sell advertising, there is no need to rate the programming. Also, once the rating system gets started, it is impossible to stop.
Netflix operates in three segments: Domestic streaming, International streaming, and Domestic DVD. Domestic DVD is only in the United States and is delivered through the U.S. Postal Service. On the other side of the coin, the U.S. growth rate is slowing because of already high penetration of the market. Customers will see a bit of a price hike, probably $1 a month, in the second and third quarter. Netflix management is not expecting much upset at this announcement. They still offer the best deal going.
Say what you will about Netflix, they deliver on the whole entertainment concept. There were 450 hours of original programming on Netflix in 2015, but there will be 600 hours of Netflix's own programming in 2016. The bosses want greater creative and business control and intend to continue this trend, which is another thing that upsets the traditional TV merchants. There will be quite a bit of new children's programming, as well as new seasons of some very popular Netflix originals, such as Orange is the New Black, Jessica Jones, and Narcos. More documentaries and movies are being added to the roster as well, promising a little something for all viewers.
Earlier this month, investors were surprised to hear that Netflix had expanded to over 130 additional countries. That is a very big expansion on the international market in one year's time. There are 190 countries now, nearly every country but China. China is considered the last major market by Hastings and Wells, and they intend to be quite detail minded in negotiations. It will be difficult to pull off; the Chinese government likes to have a lot of control and censorship rights on foreign technology. The China expansion could take many years Hastings says, but the groundwork is already in place. There is a possibility that Netflix will have to team up with local players in China. Hastings points out that entertainment companies must make a few compromises for a period of time. As an example, they have pixilated frontal nudity scenes for Japanese viewers. The customer is always right.