Netflix adds 13m subscribers, confirms plan for global domination
James R | On 21, Jan 2015
Netflix added 4.33 million new subscribers in the final three months of last year, as the VOD service’s plans for expansion continue to grow.
The surge in customers in the three months to December (higher than the 4.07 million recorded during the same period in 2013) took their yearly growth in 2014 to 13 million (up from 11.1 million in 2013), bringing its global total to 57.4 million people.
Netflix sees no sign of that slowing down, forecasting another 4 million in the first quarter of 2015, taking them to 61.4 million members around the world. In the US, though, growth has actually slowed, with 1.9 million new American subscribers signing up in Q4 2014, versus 2.3 million in Q4 2013. The company previously attributed its domestic slowdown to the price increase introduced last year, but with the trend continuing, has decided it’s a “natural progression” in the US market as the company’s footprint gets larger.
“We’ll continue to improve our content, our marketing and our service, to eventually achieve “must have” status in most households,” said CEO Reed Hastings and CFO David Wells in a letter to shareholders.
If that strategy is slow but steady on home soil, though, it is rocketing abroad, as the company increasingly focuses on expansion internationally. 2.43 million nom-US members signed up in the final months of 2014, boosted by the launch in France, Germany, Austria, Switzerland, Belgium and Luxembourg – and with plans to launch soon in Australia and New Zealand, that growth is set to continue.
“It is increasingly clear that virtually all entertainment video will be Internet video in the future.”
In fact, Netflix’s plans are gradually evolving from international expansion to pure global domination. “Our international expansion strategy over the last few years has been to expand as fast as we can while staying profitable on a global basis,” Hastings and Wells wrote. Now, though, the company says it can “complete global expansion” – a phrase you can imagine Blofeld saying, while stroking a cat – within the next two years, so that it can start to generate material global profits from 2017 onwards.
Original content is increasingly the key to its success, the company reveals, noting that its brand new shows and films – which have picked up 45 Emmy nominations, 10 Golden Globe nods and, just last week, a second Oscar nomination – are the most efficient part of its catalogue. Original productions cost Netflix less money than paying for licenses and, unlike most third party content, can be released worldwide rather than in a specific market. Netflix plans to grow its spending on original productions, with 320 hours of new programming released in 2014 and an already bigger 2015 line-up on the cards.
In short, Netflix wants to become nothing less than the premier global Internet TV network, distributing original content to multiple countries simultaneously.
“It is advantageous for Netflix to become global in many ways,” added the letter. “The big one is absolute size (faster to $10B in revenue) because that revenue allows us to develop and license more content for our members and improve our service. A second is being able to source great stories from around the world and deliver them to the world. A third is the efficiency and influence of being a unique global licensor that provides worldwide distribution.”
With global domination on the table, it is only fitting that Netflix should also use its Q4 2014 report to announce that it will release The Interview this week. The controversial comedy, which was originally pulled from cinemas following a cyberattack on Sony and threats to exhibitors, was released day-and-date in US theatres and on VOD at Christmas. Now, The Interview will be released on Netflix US and Canada this Saturday – just 30 days after its debut.
An even more radical release is on the way, with Crouching Tiger, Hidden Dragon II: The Green Destiny set to premiere on Netflix and in IMAX cinemas on Wednesday 26th August – two days earlier than originally planned.
With Vince Cable now calling for Europe-wide release of digital media, the idea of a future where simultaneous international releases become the standard may be a very long way off – The Interview will be released in UK cinemas in February – but Netflix is already aiming for the kind of exclusive deals it can offer rights holders, such as its recent agreement to release Gotham exclusively to subscription VOD audiences globally.
Internet TV is “going mainstream”, adds Hastings. By the time it does, the company intends to be at the front of the pack. The shareholder letter ends with a congratulations to Kevin Spacey for his Golden Globe win for House of Cards. Frank Underwood would be proud.