David Farnor | On 18, Oct 2016

Netflix exceeded expectations this summer, adding over 3 million new members to take its total to almost 87 million subscribers worldwide.

Earlier this year, concerns grew that the rapidly accelerating streaming service was slowing down in growth, with Q2 2016 seeing the site add fewer subscribers than expected. But in the months to September 2016, Netflix outperformed forecasts, adding 0.4 million in this US and 3.2 million members internationally – compared to its predictions of 0.3 million and 2 million respectively.

The site now has 86.7 million subscribers around the world, higher than its forecast of 85.5 million, with the site on pace for a steady year. For the first nine months of 2016, it’s added 12 million global members, the same as in the first nine months of 2015.

Hits such as Stranger Things helped Netflix maintain its rapid growth. The increase was driven primarily by “stronger than expected acquisition due to excitement around Netflix original content”, said Netflix Chief Executive Officer Reed Hastings, in a letter to shareholders.

Indeed, the retro sci-fi horror series was the star of the summer, its worth-of-mouth popularity attracting more people to sign up to Netflix. The show has “the kind of broad appeal, cross demographic, and cross border sensation that we hope will distinguish Netflix original content”, said Hastings.

Narcos also “had a positive impact on member acquisition across all of our markets”, he added, “demonstrating the ability for our tentpole franchises to connect with audiences across the world”.

Netflix continues to step up its original content production. In 2017, it will release over 1,000 hours of premium original programming, up from over 600 hours this year.

While its content is increasingly diverse to appeal to global audiences, the site is also becoming more localised in the way it operates. In September, Netflix localised its service in Poland and Turkey, accepting payment in local currency and adding a local language user interface, subtitles and dubbingt.

“We have seen nice gains in viewing and retention and we’ll undertake other localization efforts in the coming months and years,” commented Hastings.

The result has combined to see the streaming giant’s share soar today by around 20 per cent – a significant turnaround from its 13 per cent dip earlier in 2016.

Indeed, the growth is despite the company gradually un-freezing the monthly fee for older members, following the rise of subscription fees for new customers last year. The impact has been “consistent with our expectations”, said Hastings, with the company’s quarterly global streaming revenue exceeding $2 billion for the first time (up 36 per cent year over year).

The company expected to break even in 2016, as it continues to spend more on content, licensing and marketing in international territories. Rather than launch directly in China, though, it now plans to license content to existing online service providers in China, with revenue from this expected to be modest. In 2017, Netflix expects to generate material global profits.

This positive outlook also takes into account the growing rivalry from Amazon Prime Video, as well as YouTube, other SVOD services and other screen time competitors, such as video games.

“We presume that Amazon Prime Video will become as global as YouTube and Netflix this fall with the launch of the Jeremy Clarkson show,” admitted Hastings. “Our challenge is to continue to improve our service and content so that we better meet consumer desires. Total screen time is quite large and growing as technology and content improve globally.”

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