Netflix growth slows, as streaming giant nears 100m
Staff Reporter | On 18, Apr 2017
Netflix’s subscriber growth slowed at the start of 2017, the streaming giant has announced, although it expects to cross the 100 million mark this weekend.
5 million new customers signed up to the subscription service in the first quarter of 2017. This was down by 22 per cent year-on-year outside of the US, although this is mainly because Q1 2016 saw the firm launch in over 100 countries, which led to a surge in sign-up activity. Netflix CEO Reed Hastings said in a letter to shareholder that the slowdown was “as expected”, not least because House of Cards Season 5 has been pushed back until May: in Q2, Hastings says, Netflix expects to “about double” its subscriber additions from the same period last year.
“We have come to see these quarterly variances as mostly noise in the long-term growth trend and adoption of internet TV. For the first half of this year, for example, we expect to have 8.15 million net adds, compared to 8.42 million net adds in the first half last year,” he comments.
Indeed, it’s telling that the streaming giant is now beginning to focus more on profit and revenue than subscriber counts alone. Netflix is famous for not revealing very much of its data – although it does disclose that subscribers have now watched over 500 million hours of Adam Sandler movies, hence its deal to sign the comedian up for four more original films – but it does reveal that its revenue for its international segment has risen 62 per cent year-on-year, excluding a -$12 million impact from currency exchange rates against the strong dollar.
As a result, Q1 2017 was the first quarter of consolidated profit for its international segment. While it projects a small loss for Q2, as it continues to invest in international marketing and growth, it marks a significant step in Netflix’s global expansion, after a long period of relying on its established markets in the UK and the USA to offset expenses abroad – Hastings notes that global expansion was taking up “every spare dollar we had” last year. Raising prices and including a premium 4K plan are also part of its plan to raise funds, and that is seeing a “small but steady migration” from customers –
“The opportunity provided to us by the growth of the global internet is gigantic and our plan is to keep investing as we increase membership, revenue and operating margins,” adds Hastings.
So how is that international growth going? Netflix has “high satisfaction” rates and is “rapidly growing” in Latin America, Europe, and North America, while it is still working to improve its content for subscribers in Asia, Middle East, and Africa, although Hastings admits it has “much progress to make, like in Latin America a few years ago”.
As part of stepping up its content game, Netflix has recently hired Scott Stuber to head up its original films slate, with the aim to boost its quality of productions, following “successful” movies, such as its Sandler movies and Siege of Jadotville, and the less successful ones, which Hastings unsurprisingly names as the dire Crouching Tiger Hidden Dragon: Sword of Destiny.
The figures arrive as debate grows surrounding the site’s distribution of movies, particularly in terms of theatrical releases. With Netflix screening films at Cannes for the first time this year, its approach to cinema releases is being thrown into sharp relief against that of Amazon, which opened Cannes last year, and has been careful to highlight the importance of cinemas.
“Since our members are funding these films, they should be the first to see them,” comments Hastings. “But we are also open to supporting the large theater chains, such as AMC and Regal in the US, if they want to offer our films.”
Netflix will also spend $1 billion in 2017 marketing its content to drive member acquisition, with the same approach of personalisation that drives its own interface: programmatic ads will be deployed to deliver “the right ad to the right person at the right time” – in other words, not just showing Iron Fist trailers to everyone using Channel 4’s on-demand service, All 4.
Netflix will also be making its service more accessible to global audiences too, introducing Thai, Romanian and Hebrew languages to the 24 it currently supports.