Netflix Grows to 75 Million Members, Sets Ambitious Goals for 2016

Netflix reached 75 million members globally on January 1, said the company in a January 16 letter to shareholders. “Our quarter-end 74.76 million members

Subscription News: Netflix Grows to 75 Million Members

Source: Netflix

Netflix reached 75 million members globally on January 1, said the company in a January 16 letter to shareholders.

“Our quarter-end 74.76 million members put us at over 17 million net additions for the year, showing how much the world is embracing Internet TV,” said the letter. “We bring great stories from all over the world to people all over the world.”

In the third quarter Netflix added 5.59 million members worldwide, exceeding its forecast of 5.15 million members for the quarter. Netflix attributes its success to its global expansion in Japan, Spain, Portugal and Italy, as well as exclusive, award-winning programs. In 2015, six of Netflix’s original shows were included in the top 10 new TV shows of 2015, according to IMDB: Bloodline, Sense8, Master of None, Jessica Jones, Daredevil and Narcos.

Other fourth quarter highlights include:

  • $1.672 billion in total streaming revenue, compared to $1.305 billion year-over-year
    • $1.106 billion U.S. streaming and $566 million international streaming
  • 76 million total members, 70.84 of which are paid members
  • Global growth into 130 additional countries
  • Average subscriber price grew 4 to 5 percent, year-over-year, around the world
  • Increased adoption of Netflix’s Ultra-HD plan at $11.99 per month
  • High penetration in the U.S. has slowed net subscriber growth.
  • New credit/debit card rollover continues to be a “background issue.”

 Sets Ambitious Goals for 2016

Source: Netflix

What’s next? Netflix anticipates adding another 6 million members worldwide in the first quarter of 2016 and expanding to all nations except China. Also, in the second and third quarters of 2016, Netflix will be releasing a “substantial number” of U.S. members from price grandfathering on the HD plan. They can continue their membership at $7.99 per month on the SD plan, or remain on the HD plan for $9.99 a month.

“Given these members have been with us at least two years, we expect only slightly elevated churn,” Netflix said.

Also in 2016, Netflix will launch over 600 hours of original programming, an increase of 150 hours from 2015. They will add new seasons for 30 or so original series, eight original feature films, 35 new seasons of original series for kids, a dozen documentaries and nine stand-up comedy specials. The company said it plans to put a special emphasis on family-friendly shows like Unbreakable Kimmy Schmidt and Stranger Things.

Netflix’s shareholder letter addressed recent criticism by an NBC executive who believes that Internet TV is overblown and that traditional TV is “TV like God intended.”

“Our investors are not as sure of God’s intentions for TV, and instead think that Internet TV is a fundamentally better entertainment experience that will gain share for many years,” said Netflix. “The challenge for traditional media companies, most of whom see the future pretty clearly, is to use revenue from Netflix and other SVOD services to fund both great content and their own evolution into Internet TV networks. Seeso, BBC iPlayer, Hulu, CanalPlay, HBO Now and CBS All Access are the beginnings of these efforts.”

Netflix also addressed the competition in its letter. Netflix continues to garner market share in a growing market. In 2015, 42.5 billion hours of content were streamed via Netflix, compared to 29 billion hours in 2014. Of peak download Internet traffic in North America, Netflix was the highest percentage at 37% with YouTube next at 18%, followed by HTTP at 6%, Amazon Video, iTunes, BitTorrent, Hulu and Facebook at 3%, and Other at 25% (totals 98%).

“…Internet TV will likely have multiple winners as the various services are not direct substitutes for each other given differing sets of content,” said Netflix. “…the entire over-the-top category is growing as consumers increasingly embrace Internet TV and on demand viewing and, even better, this growth is coming at the expense of piracy.”

Insider Take:

We tend to agree with Netflix. Though Netflix is a frontrunner in the streaming video on demand industry, it recognizes that there are other players getting into the game. This competition is healthy because each company strives to put forth its best content and to deliver a quality package to subscribers.

And because each OTT streaming service offers a different product mix, consumers have a variety of choices of where to spend their entertainment dollars. Companies who do well – like Netflix – will keep an eye on the competition while continuing to plot their own course into the future, testing different markets and strategies, and making adjustments as needed. Successful companies are also aware that Internet TV is not necessarily a substitute for traditional, or linear, TV. It is a complement.

 

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