M+E Connections

Strong consumer interest in the growing stable of Netflix original content, including the new show “Stranger Things,” was the primary driver of the stronger-than-expected subscriber growth that the company reported Oct. 17 for the third quarter ended Sept. 30, Netflix shared.

Netflix added 400,000 new members in the U.S. during the third quarter, compared to the company’s forecast of 300,000, and added 3.2 million members in other markets, compared to the 2 million it had projected, it said.

Global streaming revenue totaled $2.2 billion in the third quarter, up from $1.6 billion in the third quarter last year, Netflix said, adding 40% of the revenue this time was generated outside the U.S. Total profit, including optical discs and streaming, grew to $52 million (12 cents a share) from $29 million (7 cents).

The results sent Netflix shares soaring in after-hours trading Oct. 17, and were up nearly 20% at $119.64 at about 2 p.m. ET Oct. 18. That’s despite the fact that Netflix predicted a moderate year-over-year decline in net new subscribers to 5.2 million members in the fourth quarter (1.5 million in the U.S. and the rest in other markets), and also warned that it will “face a tough international net adds comparison” in the first quarter of 2017 because of the initial membership surge that it saw in the first quarter of this year as a result of launching in 130 additional territories.

Netflix is “only probably going to be able to make a little progress on increasing” net subscriber additions year-over-year in 2017, CEO Reed Hastings said during an interview with analysts that was made available online. He added: “We’re fundamentally in this growth cycle” right now that is a result of the Internet, smart TV and “people getting used to on-demand” viewing of content.

After increasing the price of streaming subscriptions to existing customers by $2 to $9.99 early this year to match what new members had already been paying, Netflix has “no plans” for additional price increases “outside of an inflation adjustment that we do” in Brazil on an annual basis which he said is “the law there.”

Netflix still has “a lot of room to go to improve” its service, he also said. The company only recently localized in Poland and Turkey, boosting its localized languages to 22, he said. “YouTube is at 50. So we’ve got a long way to go in that localization effort,” he said.

Netflix is hoping that the recent integration of its service with the Comcast X1 platform will result in a meaningful contribution to results in the fourth quarter, he went on to say. Having Netflix integrated into X1 “will make it easier to use,” he said.

Netflix, meanwhile, is “open to” making its content available for off-line downloading by the end of 2016, he said. “It’s something we’re looking at. But we have nothing more specific to offer” at this time, he said.