COMPANY TOWN

Netflix shares surge on subscriber growth

Netflix stock rose about 16% to more than $400 a share after its earnings release

Netflix finished off 2014 with better-than-expected subscriber growth as the streaming giant gained users outside the U.S.

The company on Tuesday said it added a total of 4.33 million users in the U.S. and internationally in the three months that ended Dec. 31, compared with the 4 million the company had previously forecast.

That growth number was welcome news to investors. The stock rose about 16% to more than $400 a share after the earnings release, which came out after the close of trading. Its global subscriber count stands at more than 57 million.

But Netflix isn't adding U.S. customers as fast as it used to. About 1.9 million Americans signed up for the streaming service in the fourth quarter, down from the 2.33 million domestic customers it added in the same period a year ago.

Still, Netflix Chief Executive Reed Hastings, in a video interview with analysts, stood by his goal to one day reach 60 million to 90 million U.S. subscribers.

"If you step back and say, 'Is Internet video going to be in every home in America in 10 years?' that's a pretty clear 'yes,'" Hastings said. "It's looking very good. We're at 39 million in the U.S., adding 5-plus million a year, so the trajectory's great."

Now Netflix is looking to countries outside the U.S. for big numbers. About 2.43 million non-U.S. viewers signed up for Netflix in the quarter, a 40% increase from the 1.74 million added during the same period in 2013.

Analysts said the brisk international growth was partly due to recent launches in European countries including France, Germany and Austria. The international market is an important bet for Netflix as it tries to compete with HBO for dominance in the premium video business. Netflix, already in 50 countries and territories, plans to launch in Australia and New Zealand in March.

Michael Pachter, an analyst at Wedbush Securities, said the international subscriber growth was "not a big surprise, but good, nonetheless."

The company hopes new, original shows — including the big-budget series "Marco Polo" — will draw foreign audiences.

Unlike early Netflix successes such as the Kevin Spacey beltway drama "House of Cards" and women's prison series "Orange Is the New Black," "Marco Polo" has not generated much praise from television critics. However, Netflix announced earlier this month that there will be a second season of "Marco Polo."

Executives said Netflix will continue to take hold in foreign countries as Internet TV becomes the norm in countries with Web access.

"The magic of streaming is on-demand and control, being able to binge on episodes, watch a movie in the middle of the night," Hastings said. "That is a very universal truth, which is even stronger in developing markets where television is not as advanced as it might be, say, in the U.S. or France."

For the quarter, Netflix reported earnings of 72 cents a share on $1.48 billion in sales — much greater than the average of 45 cents a share that Wall Street analysts had predicted, according to FactSet.

Furthering its push into original content, Netflix is starting to finance its own feature films. It plans to release Weinstein Co.'s "Crouching Tiger, Hidden Dragon" sequel this summer, and has secured a deal with Adam Sandler for four movies.

Competition is ramping up now that e-commerce giant Amazon.com is chasing Netflix into the movie business.

The Seattle retailing giant said Monday that it plans to acquire and produce about a dozen small-budget "prestige" films a year as part of its Amazon Original Movies initiative. Amazon intends to release movies in theaters before making them available on its Prime Instant Video streaming service.

That announcement came just one week after Amazon scored a coup with its original television programming. The company earned a Golden Globe for television series, musical or comedy for "Transparent," starring Jeffrey Tambor, who won a lead actor award for his performance.

Amazon has also announced a deal with filmmaker Woody Allen, who will write and direct a yet-untitled series for Amazon, the online retail giant said last week.

With the rise of original programming for the Web, services such as Netflix and Amazon have emerged as possible alternatives for people who don't want to pay for expensive cable or satellite TV packages. Nearly a quarter of Netflix subscribers are recent "cord-cutters," according to a recent survey of about 1,000 people by the New York financial firm Cowen & Co.

For its part, Netflix is starting the new year with a controversial get. The company announced Tuesday that it would begin streaming Sony Pictures' comedy "The Interview" on Saturday for customers in the U.S. and Canada.

The film, which depicts a fictional assassination plot against North Korean leader Kim Jong Un, is thought to be at the center of the devastating cyberattack that crippled the studio late last year.

ryan.faughnder@latimes.com

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