Netflix international growth soars

Netflix has kicked off its new fiscal year with a robust set of numbers which show a moderate acceleration in growth over the prior quarter.

Total revenue rose by 24 per cent, fuelled by a 57 per cent uplift in streaming revenue from overseas, and a respectable 18 per cent uplift in revenues within the US.

Despite the investment involved in pushing out the service to over 130 countries, Netflix managed to boost net income growth by 17 per cent. While some of this is down to improving profitability in many overseas markets, some of it is also the result of a much better performance in the US.

It is notable that this quarter Netflix managed to grow its US membership base by 13 per cent to just under 46 million subscribers. By recent standards this is an impressive increase and one that reflects the popularity of Netflix’s original content – with shows like House of Cards, Fuller House, and Making a Murderer all helping to drive subscription numbers upwards.

That original content is persuading more people to subscribe and renew is encouraging, not least because this is a key way Netflix can differentiate itself as competition in the streaming space increases.

As intense as it already was, competition in the streaming space has become tougher with today’s announcement by Amazon that it is to launch its own stand-alone streaming subscription service, which will be separate from Prime membership. While this will not carry all of Netflix’s new content, it has one distinct advantage: the ability for users to download content to their devices and to watch it ‘on-the-move’. This is an innovation that is likely to prove popular and is one that, in our view, Netflix will need to imitate if it is to retain its edge.

In some ways, Amazon’s move demonstrates how important it is for streaming companies to innovate not just in terms of content, but also in terms of technology. Amazon currently has a slight edge in this regard and it is important that Netflix does not allow this edge to grow.

While the US is important and will remain a vital part of Netflix’s business, especially in terms of profit, it is notable that some 42 per cent of subscriptions are now from outside the US. This is despite the fact that recent expansion remains embryonic with Netflix’s proposition in many geographies confined to English and payment with international credit cards. As the company refines these things growth should pick up and push the balance of subscriptions in favor of international.

Despite more competition, Netflix shows no signs of slowing down. That said, profits should moderate in the second quarter as US subscription growth returns to more normal levels.

 

 

 

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