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Netflix sees dramatic subscriber growth in fourth quarter, lifted by overseas expansion

Netflix
Netflix had a busy fourth quarter with the launch of its dramatic series “The Crown” as well as the new “Gilmore Girls.”
(Elise Amendola / Associated Press)

Netflix Inc. surged past expectations for the fourth quarter, announcing on Wednesday that it had added nearly 7.1 million subscribers worldwide, well above its forecast additions of 5.2 million for the quarter. 

The news sent shares of Netflix soaring in after-hours trading Wednesday, with the stock climbing more than 8% to $144.

The Los Gatos, Calif.-based streaming TV giant posted net income for the fourth quarter of $67 million, with earnings per share of 15 cents, beating guidance and analyst estimates of 13 cents per share. The company had earnings per share of 7 cents in the year-ago quarter.

Streaming revenue for the quarter was $2.4 billion, up more than 40% from the same period a year ago.

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Netflix was boosted in the quarter by the debuts of such high-profile shows as “The Crown,” its dramatic series about Queen Elizabeth II, as well as the new “Gilmore Girls.”

Other notable premieres included the incarceration documentary “13th,” the Barack Obama biopic “Barry” and the kids-oriented animated series “Trollhunters” from DreamWorks Animation.

Most of the subscriber growth for the quarter came from overseas as Netflix has continued to ramp up its international operations and local-language initiatives as its U.S. subscriber growth slows. Overseas subscriptions climbed by 5.1 million during the quarter, while U.S. subscriptions rose by about 1.9 million. 

The company has been aggressively expanding in Europe and Latin America, but it has yet to tap into China due to what it said is a tough regulatory environment for foreign streaming services.

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Overall in 2016, Netflix said it added 19 million new subscribers worldwide, versus 17.4 million in 2015. Its worldwide membership stands at 93.8 million and is poised for further growth.

“Netflix remains in the earlier stage of realizing the value of its global leadership position in Internet TV,” said Michael Morris, an analyst at Guggenheim Securities, in an research report this week.

Netflix will continue to focus on “more content, better product,” said co-founder and Chief Executive Reed Hastings during an investor call.

The company has stated that it expects to spend $6 billion on content in 2017, plus $1 billion on technology and development. The new year will see the debut of “Iron Fist,” the company’s latest Marvel-themed series, as well as the reality competition series “Ultimate Beastmaster.” 

Netflix is also ramping up spending on original comedy programming, Ted Sarandos, the company’s chief content officer, said during the call. He said Netflix previously licensed the bulk of its comedy material but has found that producing its own content is a better investment. 

In a coup, the company this week signed a deal with Jerry Seinfeld to bring his series “Comedians in Cars Getting Coffee” from Sony’s Crackle. The deal also includes stand-up specials.

Globally, shows such as “Luke Cage” and “Narcos” have proven popular around the world, executives said, adding that the new “Gilmore Girls” drew a surprisingly large number of viewers outside the U.S. The company doesn’t publish viewer data for its shows.

For 2017, Netflix leaders allayed fears among consumers that it would raise prices. “We don’t have any plans for any near-term changes,” Hastings said. The company experienced some consumer blowback last year when it raised prices by $2, bringing the cost of a standard HD subscription to $9.99 a month.

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Netflix executives also denied that a possible weakening of net neutrality regulations — those designed to ensure the free flow of content on the Internet — under the Donald Trump presidency would adversely impact the company.

“We are now popular enough with consumers to keep our relationships with [Internet service providers] stable,”  the company said in note to shareholders. “We hope the new U.S. administration and Congress will recognize that keeping the network neutral drives job growth and innovation.”

 

 

david.ng@latimes.com

Twitter: @DavidNgLAT


UPDATES:

4:20 p.m.: This article was updated with comments from Netflix’s investor conference call.

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This article was originally published at 1:55 p.m.


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