Netflix continues to grow and consumers can rest easy that no price hikes are planned for the near future.

Mari Silbey, Senior Editor, Cable/Video

October 18, 2016

3 Min Read
Netflix Soars, Says No Near-Term Price Hike

Netflix blew away analyst estimates in the third quarter, reporting an earnings-per-share number of $0.12 compared to predictions in the $0.06-$.07 EPS range. The company also tallied $2.2 billion in streaming revenue for the quarter, up from just under $2 billion in Q2 and $1.6 billion a year ago. Net income rose to $52 million, and Netflix boosted its total streaming subscriber count to 86.7 million customers, a net addition of 3.57 million subs in the quarter.

Share price climbed for Netflix Inc. (Nasdaq: NFLX) in after-hours trading as much as 22% to $120.40.

The third-quarter results for Netflix were markedly different from the disappointing results of Q2, which had investors concerned over the company's ongoing potential for growth. (See Netflix Sub Slowdown Sends Stock Spiraling.)

CEO Reed Hastings apologized on the Q3 quarterly earnings call for the company's volatility, but also suggested that on a yearly basis, Netflix's growth trajectory is both steady and strong. That fact, said Hastings, is not because of any one new original program the company introduces, but due to "much more of a deep force that's changing the market," i.e. the shift to on-demand, Internet-delivered television.

In a note of positive news for consumers, Hastings also stated that Netflix has no plans for another subscription price hike in the near future, with the exception of required inflation adjustments in Brazil. Netflix saw some increased churn when it began moving subscribers off grandfathered pricing plans earlier this year. Having absorbed that impact, however, Netflix now appears to be back on a positive track.

Want to know more about video and TV market trends? Check out our dedicated video services content channel here on Light Reading.

Netflix executives chose not to elaborate on reports that the company will introduce a download-to-go option for content before the end of the year. Instead, Hastings repeated his well-worn line that the company is open to the idea, but added that he had "nothing more specific to offer." (See Netflix Queues Up Video Downloads.)

Hastings spoke in more detail about the recent integration of Netflix service with Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s X1 platform. Asked if the partnership would create a meaningful contribution to revenue, Hastings pointed out that "Comcast users tend to be pretty advanced, high-income households," and that many likely subscribe to Netflix already. However, Hastings added that a positive experience through the X1 integration can only improve word-of-mouth for Netflix and help continue the company's positive momentum. (See Comcast Binges on Netflix in New Beta.)

Significantly, Hastings had high praise for X1 as a whole, calling the set-top platform "the most powerful CPU box we've ever seen."

Going forward, Netflix will continue to spend heavily on original content, with a planned budget of approximately $6 billion for 2017. Despite significant costs, however, the company also expects its revenue and net income to continue to rise. Netflix is forecasting streaming revenue of $2.3 billion in the fourth quarter and total net income of $56 million.

— Mari Silbey, Senior Editor, Cable/Video, Light Reading

About the Author(s)

Mari Silbey

Senior Editor, Cable/Video

Mari Silbey is a senior editor covering broadband infrastructure, video delivery, smart cities and all things cable. Previously, she worked independently for nearly a decade, contributing to trade publications, authoring custom research reports and consulting for a variety of corporate and association clients. Among her storied (and sometimes dubious) achievements, Mari launched the corporate blog for Motorola's Home division way back in 2007, ran a content development program for Limelight Networks and did her best to entertain the video nerd masses as a long-time columnist for the media blog Zatz Not Funny. She is based in Washington, D.C.

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