Thursday, 22 January 2015

Netflix has a great Q4, beats Wall Street estimates

Companies’ earnings reports are rarely exciting, but cord-cutters are probably keeping a close eye on Netflix. They’ll be glad to hear that the company is continuing to defy the cable TV model by beating the expectations of Wall Street both in earnings and user base growth.

Home country growth in the US is starting to slow down – “a natural progression in our large US market as we grow” – says Netflix, so expanding internationally is becoming more important.

Netflix posted revenues of $1.48 billion for the final three months of 2014, with earnings per share of $1.35. That’s up from $1.18 billion in revenues and $0.79 EPS from last year. Wall Street’s prediction was for $1.48 billion and $0.45 respectively.

The company also beat predictions for new subscribers – it drew in 1.9 million new users in Q4 2014 for a total of 39.1 million, up from 33.4 million from 2013. Internationally 2.4 million new users joined, in part thanks to Netflix’s expansion into new markets.

In the third quarter of last year the company expanded its European presence (adding France, Germany, Austria, Switzerland, Belgium and Luxemburg). Australia and New Zealand will get Netflix during the next couple of months.

The company claims that the switch from “linear” to “Internet” TV has been beneficial in expanding demand for its services. What this means is that shows like House of Cards can structure their episodes to find the best pacing for the story rather than working around commercial breaks and TV schedules.

Netflix execs believe they can compete the company’s global expansion over the next two years. That means reaching 200 countries, up from the current 50. The plans for most countries are straight forward, though China might prove a tough nut to crack.

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