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Netflix reports blockbuster Q4 earnings

22 January 2015
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Netflix this week released the results of its fourth quarter earnings report, which saw the streaming service add 13 million worldwide subscribers during 2014, including 4.3 million during the final three months. The positive news sets the company in good stead for the coming year, as it sets its sights on global expansion, including an Australia launch in March.

The record number of new members last year brings Netflix global total to 57.4 million members, and in a letter to shareholders the California-based service states that it expects this to rise to 61.4 million by the end of Q1 2015. ‘Internet TV is growing globally’, the company proclaims, ‘and Netflix is leading the charge.’

Earnings also reportedly rose to a new quarterly high of $83.4 million, or $1.35 per share, a 72 per cent increase from the same time last year. Analysts had expected Netflix to report earnings of about 45 cents per share on $1.48 billion in revenue, according to Thomson Reuters.

Netflix US forecast for Q4 members proved very accurate, and although its international forecast was low – predicting a total of 17.99 million members, the actuals came in slightly ahead – 18.28 million. However, on an absolute basis, US net adds are actually down compared to one year ago (1.9 million this Q4 versus 2.3 million for Q4 2013). It attributed the reductions in year on year net additions as a “natural progression in our large US market as we grow.”

Things are on the up internationally though, with net adds of 2.43 million members in Q4, compared to 1.74 million a year ago. Its initial set of markets (Canada, Latin America, the UK, Ireland, the Nordic countries and the Netherlands) achieved contribution profitability in Q3 and continue to grow. In Q3 the service launched in France, Germany, Austria, Switzerland, Belgium and Luxembourg. These ‘went well’, according to the company with new original content ‘particularly popular’. The shift from linear to internet TV across the globe has driven Netflix, success and it sees 2015 as a ‘big year’ for the company in France and Germany. Despite this, the service admits that it faces strong competition from broadcasters like CanalPlay in France.

In an interview the company remained shady about which international territories helped in the better than expected membership figures. “We don’t talk specifically about individual markets for competitive reasons. But I would say it wasn’t driven by any one individual market, it was driven by several markets,” said David Wells, Netflix CFO.

The company attributed its content to its successful European launches, as Ted Sarandos, Netflix chief content officer, explained: “We’ve been really enthused to see – particularly in our Western European launches – shows like Orange is the New Black and House of Cards, even in later seasons, performing tremendous for us.”

The company have stressed the importance of continuing to provide great content for audiences, financed by long-term debt. ‘As long as the maturities are spread out, and the interest cost is built into our content budgets, we think long term debt is the best way for Netflix to finance the production of content,’ the company reported in its letter to shareholders.

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