Netflix exceeds market expectations
Fears that the video streaming company Netflix is running out of momentum have been quashed, at least for the time being. Concerns about growth were swept away after the company reported that 3.2 million international subscribers had been added to its database in the three months up to September – that’s 50% up on expectations.
On top of 370,000 US memberships, this makes a total of 3.57 million subscribers, way ahead of the two million forecast by analysts and brokers.
After worries about the company were proved wrong, trading on Wall Street saw shares rocket by almost 20%.
It was thought that Netflix’s growth was slowing, and after a disappointing second quarter, reported in July, shares in the company fell by around 13%. New subscriber levels had failed to reach the company’s own expectations, but in the intervening period the addition of more original content and initiatives to offer more varied services internationally have paid off.
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A measured approach boost the share price
Netflix has now launched in over 130 countries, although it is taking a measured approach in China, where plans are afoot to license existing service operators, rather than launch its own operation.
“We are now in the fourth year of our original content strategy and are pleased with our progress,” a letter to shareholders said. “In 2017, we intend to release over 1,000 hours of premium original programming, up from over 600 hours this year.”
Investment in video streaming companies is always going to be complicated. This is because it’s difficult to know which shows will be hits and cause more people to subscribe to the service. Net streaming companies also need to innovate and stay ahead of the competition, but it’s clear that those who bought shares in Netflix after the dismal second quarter report profited from a great buying opportunity. It’s thanks to original series’ like Stranger Things and Narcos that quarterly sales in the company passed $2 billion for the first time.
Netflix is forecasting more good news. It said it expects to add 1.45 million US subscribers in the current quarter and is aiming to increase its content budget to about $6 billion in 2017.