It might not be a digital music company (yet) but Netflix’s growth remains of considerable interest to the music industry for its similarities – and its differences – to subscription services in our industry. This morning, Netflix’s shares are up considerably after financial results that showed an unexpectedly large jump in subscribers.
The video-streaming service added 3.2 million new international subscribers in the third quarter of 2016, as well as 370,000 new US subscribers, taking its total to 86.7 million.
Analysts had expected just two million new international subscribers, but Netflix’s investment in its own shows and films sprang a surprise. “Our over-performance against forecast was driven primarily by stronger than expected acquisition due to excitement around Netflix original content,” as the company put it.
As for the financials: Netflix reported $2.16bn of global streaming revenue in Q3, the first time it has exceeded $2bn in a quarter, and a 36% year-on-year rise. $1.3bn of those revenues came from the US and $853m from elsewhere in the world, with Netflix’s subscribers split 47.5 million and 39.3 million respectively.
Netflix is predicting 5.2 million global net additions in the final quarter of 2016, which would take it above 92 million subscribers – meaning it should hit 100 million sometime in 2017.
Netflix’s letter to investors for Q3 provides plenty of reminders of the differences between the streaming video and music worlds. Take original content for example: “In 2017, we intend to release over 1,000 hours of premium original programming, up from over 600 hours this year,” explained Netflix, which plans to spend around $6bn on that original content in 2017.
One aspect where Netflix does face the same challenges as music-streaming services is its desire to expand into China.
“The regulatory environment for foreign digital content services in China has become challenging,” Netflix told investors. “We now plan to license content to existing online service providers in China rather than operate our own service in China in the near term.”