[opendtv] Netflix Shares Surge On Q4 Results | Multichannel
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Wed, 21 Jan 2015 09:29:24 -0500
http://www.multichannel.com/news/tv-apps/netflix-shares-surge-q4-results/387078
Netflix Shares Surge On Q4 Results
Netflix continued to expand its subscriber base worldwide in the fourth quarter
of 2014, even if the rate of growth in the U.S. showed signs of slowing.
Shares in Netflix surged $45.20 (12.96%) to $394 each in after-hours trading
Tuesday as it beat Wall Street earnings and subscriber forecasts.
Netflix signed on 4.33 million net adds in the period (versus a projected 4
million), extending its global membership to 57.39 million. Of that, Netflix
added 2.43 million subs outside the U.S., expanding its international sub base
to 18.28 million. Netflix added 1.9 million U.S. streaming subs in the period,
down from 2.33 million in the year-ago quarter.
For all of 2014, Netflix added a record 13 million new members, up from 11.1
million in 2013, the company said in its quarterly letter to shareholders.
Netflix posted fourth quarter net income of $83 million ($1.35 per share) on
total revenues of $1.3 billion, up from $962 million in the year-ago period.
Netflix’s international business posted a fourth quarter loss of $79 million on
revenues of $388 million. In Q1, Netflix expects its international business to
post a loss of $62 million on revenues of $425 million.
The company expects to add 4.05 million subs (2.25 million internationally) in
the first quarter of 2015, which would extend its subscriber total past 61.44
million (20.53 million from outside the U.S.).
Netflix said additional research showed that price increases are not the main
culprit for slower growth in the U.S., believing the decline would have
occurred independent of that as growth in net adds has been the strongest in
lower income areas of the U.S.
“We think, instead, the reduction in y/y net additions is a natural progression
in our large US market as we grow,” the company told shareholders. “We have
built in flexibility to our business model in terms of how quickly we grow
content and marketing spend, so we intend to keep US contribution margins
growing even with lower membership growth.”
In 2015, Netflix plans to increase U.S. contribution margins from 30% in Q1 to
about 32% in Q1 2016 to about 34% in Q1 2017. The company is hopeful that it
can achieve 40% contribution margins by early 2020.
Overall, the company remains bullish, as it is “increasingly clear that
virtually all entertainment video will be Internet video in the future….We
believe there is big growth ahead in the US market for Netflix, even if we may
not get there in a straight line of 6 million annual net adds. We’ll continue
to improve our content, our marketing and our service, to eventually achieve
‘must have’ status in most households.”
The company expects to launch in Australia and New Zealand in late Q1, and
believes it can complete its global expansion over the next two years while
remaining profitable. Netflix is still “exploring options” for China, labeling
them as “modest.”
On the content front, Netflix said it will launch 320 hours of original series
(new and returning) this year, roughly triple the amount of original fare it
released in 2014.
Netflix also said it has made progress with set-top integrations, citing recent
rollouts with British Telecom and TalkTalk on the YouView set-top in the United
Kingdom; Deutsche Telecom in Germany; Bouygues, SFR, and Orange STBs in France;
Proximus in Belgium, and select Dish Network boxes in the U.S.
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