James R | On 20, Jan 2016

Netlix added 17 million new members in 2015, the company has announced, as its plans for world domination continue to grow.

On 1st January 2016, the streaming giant crossed 75 million members – at the end of 2015, it had 74.76 million, which suggests 240,000 people signed up between New Year’s Eve and New Year’s Day. That growth was just as rapid throughout the final three months of 2015, with its membership base rising by 5.59 million people, up from the 4.33 million added in the same period in 2014. In the US, 1.56 million people signed up to the service, with 4.04 million people signing up outside of the US.

We think we’ll grow by over 6 million members in Q1 given
our expansion of Netflix to virtually everywhere but China.

That surge, which has also sent the firm’s share prices soaring, was driven primarily by a launch in Japan in September and Spain, Portugal and Italy in October.

“We are very pleased with the first few months of membership growth in these markets,” says CEO Reed Hastings in a letter to investors.

2016 has already seen the company’s ambitions rocket, with Netflix launching in 130 additional countries all in one go at CES this month. This had added 190 million broadband homes to its target market, on top of the 360 million it counted at the end of 2015.

“While the opportunity is large, our growth in these new markets will unfold over many years,” comments Hastings.

One market that still eludes them is China. Indeed, the company is particularly cautious about launching in the country, admitting there is “uncertainty”.

“We are building relationships, understanding the market, and seeking the conditions we require to provide our service to entertainment lovers there,” adds Hasting. “Our expectations are modest and long‐term. We may be able to get started this year and thus deliver on ‘whole world by end of 2016’ or it may take longer.”

That rapid expansion, which is vital to increase Netflix’s revenue, continues to place a strain on the company coffers.

One hurdle this year will be price rises for customers, as a “substantial number” of existing US subscribers will find their monthly fees unfrozen following a previous hike – after being “grandfathered” on an HD plan at $7.99 a month, they will be asked to pay the new $9.99 HD fee, or switch to SD streaming.

“Given these members have been with us at least 2 years, we expect only slightly elevated churn,” says Hastings. Indeed, the company’s average subscriber price grew 4‐5 per cent year-on-year around the world, another key component of the company boosting its revenues.

Netflix lost $109 million on international expansion in Q4 2015, with losses of $114 million forecast for the first three months of this year. On earnings, it stayed profitable in Q4 and delivered operating income of $60m and net income of $43m.

“We continue to expect material global profits beginning in 2017,” says Hastings.

The major factor for Netflix attracting new customers and retaining old ones, even as prices climb, remains content – and the streaming giant is still ramping up its production arm. It premiered five new original series in Q4 2015, while its 2015 slate saw Jessica Jones, Master of None, Narcos, Sense8, Marvel’s Daredevil and Bloodline all included in IMdB’s Top 10 new TV shows for last year.

Even Adam Sandler’s first Netflix original film, The Ridiculous Six, which was panned by critics upon its 11th December debut, has proven a success: it was the most viewed movie on Netflix in every territory the week of its release and the most‐viewed movie ever on Netflix, compared to other movie viewing figures during their initial 30 days on the service.

If 2015’s 450 hours of original programming in 2015 was staggering, 2016 will easily eclipse it: this year, Netflix plans to launch over 600 hours of original programming, as it aims to both attract more members and, most importantly, retain its own global distribution rights so that content is accessible to all of its customers worldwide.

“Increasingly, our goal is to own more of our original programming to allow for greater creative and business control and to ensure global access to content,” confirms Hastings.

He also responded to recent comments made by NBC, which claimed to release viewing figures for Netflix titles last week, calling for “perspective” in the way the media reports online video streaming.

“The growth of Netflix has created some anxiety among TV networks and calls to be fearful. Or, at the other extreme, an NBC executive recently said Internet TV is overblown and that linear TV is ‘TV like God intended’,” writes Hastings. “Our investors are not as sure of God’s intentions for TV, and instead think that Internet TV is
a fundamentally better entertainment experience that will gain share for many years. The challenge for
traditional media companies, most of whom see the future pretty clearly, is to use the revenue from Netflix and other SVOD services to fund both great content and their own evolution into Internet TV networks. Seeso, BBC iPlayer, Hulu, CanalPlay, HBO Now, and CBS All Access are the beginnings of these efforts.”

“Our titles are watched on the go and at home on a wide range of devices, making measurement of the viewing of any given title difficult for third parties,” he adds. “We don’t release title‐level ratings as our business
model is not dependent on advertising or affiliate fees. Instead, we release “ratings “ for Netflix as a whole every quarter with our membership growth report (75 million and counting!). It is member viewing and satisfaction that propels our growth.”

Satisfaction certainly appears to be the word for it: subscribers streamed 42.5 billion hours of content in 2015, up from 29 billion hours in 2014.

For a full list of Netflix original shows coming soon in 2016, click here.

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