Netflix is rolling in revenue after signing up more people than expected

Gladys Abbott
April 17, 2018

Operating margin of 12 per cent rose 232 bps year over year.

Netflix executives reportedly credit the unbelievable quarterly performance to the carefully planned timing of spending on new content.

Investors and analysts were most impressed by the subscriber gains, which came in well ahead of the company's own forecasts. The Q1 2018 report reveals that Netflix now has 125 million subscribers worldwide, out of which a little over 68 million live outside the US. For 1Q, we expect Netflix to report global net adds of 4.95mn and domestic net adds of 1.46mn. The US is Netflix's biggest individual market, with almost 57 million of its subscribers - about 45 percent of its total subscriber base - in the company's home market.

"Last year, we expanded our efforts in original programming to uscripted shows across several genres". But that rule doesn't seem to apply to Netflix, at least not yet. Hastings said on an earnings call.

Netflix also committed $17.9 billion to streaming content deals with creators such as Ryan Murphy, Shonda Rhimes, Shawn Levy and Jenji Kohan. Netflix had said it expects to grow to 60 million to 90 million members in the USA over time and that it would spend $8 billion on content and $2 billion on marketing this year.

The company said that Spanish series Money Heist became its "most-watched non-English series on Netflix ever". Canaccord Genuity reiterated a "buy" rating and set a $140.00 price objective on shares of Netflix in a research note on Sunday, December 4th. The company is also doing more marketing around these originals and experimenting with how to promote them in different parts of the world. Cambridge Investment Research Advisors Inc.'s holdings in Netflix were worth $8,833,000 at the end of the most recent quarter.

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In related news, insider Theodore A. Sarandos sold 163,747 shares of the business's stock in a transaction that occurred on Thursday, February 8th. That said, the numbers used to accumulate the data were not officially released from Netflix, and we can bet that Netflix had numbers that encouraged the production of originals. "Topical interview shows, absolutely, but keep in mind, those are entertainment".

Still, Netflix continues to face stiff competition. Even Facebook is pushing deeper into video content. (Netflix's CEO Reed Hastings sits on its board). Additionally, the Cannes film festival recently announced that Netflix movies are banned. The giant yielded $3.701 billion in revenue against the analyst's projection of $3.700 billion and the Street's $3.690 billion- and the company's own guide calling for just $3.686 billion.

On a conference call with analysts, Netflix executives admitted to being surprised by the company's current level of success.

"We remain primarily a direct-to-consumer business, but we see our bundling initiative as an attractive supplemental channel", the company said.

Sarandos added that Disney's plan to launch a branded streaming platform with exclusive Marvel, Pixar and LucasFilms content would not prevent Netflix from continuing its "Defenders" universe.

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