January 14, 2019
Netflix’s fiscal fortunes on Wall Street largely revolve around meeting or exceeding subscriber growth projections. The more subs added, the less attention investors put on the streaming video pioneer’s ballooning content spend.
Netflix is estimating it added 9.4 million new subscribers worldwide in the fourth quarter (ended Dec. 31, 2018), including 1.5 million in the United States.
Wedbush Securities analyst Michael Pachter contends Netflix will meet or exceed those numbers (perhaps gaining 1.7 million domestic sub additions) due to the global streaming success of original movie Bird Box, starring Sandra Bullock.
The post-apocalyptic thriller was streamed by 45 million households during its first week of release last month, according to Netflix. Nielsen said 26 million households streamed the movie in the United States.
Pachter, in a Jan. 14 note, said the sub data meant that about 40% of domestic subscribers and 20% of international subs streamed the movie, suggesting that a larger than normal number of subscribers were active at quarter end.
“We think that the unusually high activity depressed churn [subs not renewing membership], leading to upside to both domestic and international subscriber additions, and we think that our above consensus Q4 subscriber estimates may prove to be conservative,” Pachter wrote. “We expect Netflix to highlight the success of Bird Box as a subscriber driver on its [fiscal] call.”
At the same time, Pachter believes Bird Box was an anomaly. He said comparing the 45 million viewers to the opening weekend of a major theatrical release is misleading. He said that the nature of Netflix’s business model puts no additional cost on subscribers consuming content – making it far more analogous to the consumption of television programming, which also is subsumed by a subscription.
“While Bird Box definitely demonstrates the power of the Netflix platform to drive viewership of its originals, it will not necessarily lead to the long-term retention of subscribers,” wrote Pachter.
Netflix reports Q4 results at the market close on Jan. 17.