M+E Connections

Netflix CEO Touts Key Partnerships During Record Quarter

While reporting strong results for the first quarter (ended March 31), Netflix CEO Reed Hastings said April 16 that the biggest challenge ahead for his company remains boosting subscribers’ total viewing hours when using the streaming service.

“We’re a fraction of the hours of viewing of YouTube” and just “a fraction of the hours of viewing of linear TV,” he said during the company’s quarterly earnings webcast, adding: “We’ve got some great momentum, and we’re very excited about that. But we have a long way to go in terms of earning all of the viewing that we want to.”

Netflix is “continuing to invest in content, marketing, product — all of the things we’ve been doing,” he said.

The company’s partnering strategy, meanwhile, is “on an evolving trajectory across all the markets that we serve in,” said Greg Peters, chief product officer for the company.

That strategy started with TV manufacturers and the makers of other consumer electronics devices, “where we’ve integrated on their products, and that’s been hugely successful for us,” he said. But there’s a “new wave that you’ve started to see over the last several years,” so Netflix is now also partnering with internet service providers and mobile operators, and “we’ve evolved those partnerships,” he said, singling out partnerships with Comcast and Sky as two examples.

“We love the fact that we can work with these partners to access whole new groups of consumers, make it easy for them to find out about Netflix, to sign up and have a great way to access the service and watch more and more,” he said. Therefore, he noted, “you’ll see us leverage that sort of evolving strategy not only in the markets that we’ve been in for many years, but also in … new markets.”

Asked about the company’s current philosophy on mergers and acquisitions, Spencer Wang, VP of finance, investor relations and corporate development, pointed out Netflix has “only done one in our 20-year history.” (That was comics publisher Millarworld in 2017.)

Wang added: “I think the takeaway for investors is that we have a strong bias to build over buy. That being said, we do see M&A as a perfectly fine tool for us to help find interesting assets to help grow the business. So, from our perspective, we continue to be on the lookout for new IP or other related assets that can help improve the service and help us grow faster.”

Netflix added 7.41 million registered subscribers in its first quarter – a new record for the quarter that was up 50% from Q1 the prior year and better than its 6.35 million forecast, the company said in its quarterly earnings letter to shareholders. Of the streaming subscribers added, 1.96 million were in the U.S. and 5.46 million in other markets, it said. U.S. paid streaming memberships rose to 55.09 million from 49.38 million in Q1 last year. Internationally, paid streaming memberships jumped to 63.82 million from 44.99 million. Total paid streaming memberships increased to 118.90 million from 94.36 million.

“Quarterly net subscriber additions were the second highest in company history, trailing only” the fourth quarter of 2017, Wedbush Securities analyst Michael Pachter said in a research note April 17. Netflix added 8.3 million registered subscribers in Q4, it had said.

Q1 revenue grew more than 40% from a year ago, to $3.7 billion, while profit jumped to $290 million (64 cents a share) from $178 million (40 cents a share) Netflix shares were up more than 9% at $337.50 in afternoon trading April 17.