Despite slightly lower than expected subscriber gains in the first quarter, Netflix is on the verge of achieving at least two major milestones this year and making other significant moves as well as it continues to churn out strong revenue and income numbers.
In its first-quarter earnings release late Monday, Netflix Inc. (Nasdaq: NFLX) reported that it ended March with nearly 98.8 million streaming video subscribers worldwide, up 4.95 million for the period, or a bit fewer than the 5.2 million it had originally forecast. Breaking that total down, the OTT video market leader picked up 1.42 million subscribers in the US and the other 3.53 million customers internationally, raising its totals in those regions to 50.85 million and 47.89 million, respectively.
Thanks to such subscriber growth, Netflix generated $2.64 billion in revenues for the quarter, up nearly 35% on a year-over-year basis. Net income jumped to $178 million, or 40 cents per share, up from just $27.7 million a year ago.
More notably, though, Netflix revealed that it's close to clearing two major bars. First, the company said it will soon clear the 100-million-subscriber mark, possibly as soon as later this week. For the entire second quarter, it expects to add 3.2 million subscribers overall, boosting its global total to nearly 102 million.
Second, with its growth in the saturating US market steadily slowing down while its international growth continues apace after expanding its reach to 190 countries last year, Netflix is on course to have more customers outside its American home base than inside for the first time by the end of this year. By the end of the second quarter, for instance, it expects to have 51.45 million US streaming memberships and 50.49 million international ones as the gap between the two regions continues to narrow.
In another notable item from its Q1 earnings report, Netflix said it will spend more than $1 billion globally this year "marketing our content to drive member acquisition." As part of that, it plans to invest more in programmatic advertising and work more with its growing group of pay-TV provider partners, such as Comcast, Charter and Liberty Global.
Despite virtual pay-TV providers like Sling TV, PlayStation Vue, DirecTV Now, YouTube TV and Hulu's forthcoming skinny bundle service all crowding into the OTT market, Netflix dismissed them as serious competition because they offer live, ad-supported programming rather than Netflix's core mix of on-demand, commercial-free programming. While those skinny-bundle players "may appeal to a segment of the population that doesn't subscribe to a pay-TV bundle," the OTT giant said, "we don't think it will have much of an impact on us as Netflix is largely complementary to pay-TV packages." (See Comcast Ready for Clash With Hulu and Will YouTube TV Hit OTT Sweet Spot?)
Unlike OTT rival Amazon, which recently scored a streaming deal with the NFL, Netflix also ruled out venturing into live sports and other events, as it has in the past. "That is not a strategy that we think is smart for us since we believe we can earn more viewing and satisfaction from spending that money on movies and TV shows," the company said. (See Google, Amazon & the Video CDN Revolution.)
— Alan Breznick, Cable/Video Practice Leader, Light Reading