Netflix Crushes Q1 New Subscriber Estimates

Netflix April 16 said it added record 7.4 million new subscribers in the first quarter (ended March 31) – topping Wall Street estimates of 6.5 million. The service added 5.4 million subs internationally, compared to 1.96 million (1.45 million forecast) in the United States.

International operations now account for 50% of revenue and 55% of memberships. Netflix has 125 million members globally. Netflix added 1.98 million domestically in the fourth quarter, underscoring the service’s maturity in the U.S.

Financially, the SVOD service generated $290 million net income on revenue of more than $3.7 billion. That compared to net income of $178 million and revenue of $2.63 billion during the previous-year period.

Netflix generated $56.3 million contribution income from its legacy by-mail disc rental unit. Revenue topped $98.7 million, compared to revenue of $120.3 million during the previous-year period. The business ended the period with more than 3.1 million subscribers, down from 3.94 million subs last year.

In the shareholder letter, CEO Reed Hastings and CFO David Wells reiterated Netflix would spend upwards of $8 billion on original content in 2018.

Scripted original series debuts in Q1 included coming of age story The End of the F***ing World and sci-fi thriller Altered Carbon as well as returning seasons of “Marvel’s Jessica Jones,” “Grace and Frankie,Santa Clarita Diet” and “A Series of Unfortunate Events.”

“Last year, we expanded our efforts in original programming to unscripted shows across several genres. Our output in this area is now comparable to similarly-focused domestic cable networks,” Hastings and Wells wrote.

The executives said the surprise launch of sci-fi movie, The Cloverfield Paradox on Super Bowl Sunday underscored a “tight” coordination between original film, product, marketing and PR teams.

“The event showcased how a big branded film can be marketed and delivered to consumers instantaneously across the globe without a wait for the theatrical window,” Hastings and Wells wrote.

Netflix continues to generate controversy releasing original feature films worldwide concurrent with any theatrical distribution. The service is skipping the Cannes Film Festival competition since its movies in France must first be screened theatrically for 36 months.

“We would never want to do that to our French members,” wrote the executives.

Hastings and Wells heralded Netflix’s first Oscar win for bike racing doping documentary Icarus.

“We’re thrilled when the creators with whom we partner are recognized for their exceptional work,” they wrote.

Netflix Turns 21, Co-Founder Reed Hastings Talks Facebook

Netflix quietly turned 21 years old on April 14, and co-founder/CEO Reed Hastings was on a stage in Vancouver, BC, discussing lessons learned from the recent data breach scandal at Facebook.

During a Q&A on the last day of the Technology, Entertainment, Design (TED) conference, Hastings, who has been on Facebook’s board of directors since 2011, attempted to downplay recent revelations that the personal data of 87 million Facebook users had been compromised by a third party for profit.

Comparing Facebook and similar interrupting technologies to the rising popularity of the television in the United States in the 1960s, Hastings said Facebook remains sometimes misunderstood, on a steep learning curve, prone to making occasional mistakes.

“[TV] was [once] called a vast wasteland. [It] was going to rock the minds of everybody. And it turns out everybody’s minds were fine. There were some adjustments,” said Hastings, as reported by Recode.

Mistake or not, the fact millions of Facebook users’ data was used by a foreign company to impact the 2016 presidential election, found apologetic founder/CEO Mark Zuckerberg in Washington, D.C., fielding questions from lawmakers – many of whom appeared unaware how the social media platform worked.

“How do you sustain a business model in which users don’t pay for your service?” asked Utah Senator Orrin Hatch.

“Senator, we run ads,” responded Zuckerberg after a pause.

Hatch later tweeted that he knew how Facebook’s business model worked and that the real issue remained transparency in the Internet age.

Netflix’s Hastings, who is up for re-election to Facebook’s board, appeared to have Hatch’s sentiment in mind. He said Facebook deserved to be criticized and that senior management was taking the issue of protecting user data seriously.

“So, I think of it as all new technologies have pros and cons. And in social [media] we’re just figuring that out,” Hastings said.

Separately, the CEO said Netflix’s early success revolved around willfully launching a business model with built-in obsolescence and using that sand clock to enhance its revolutionary online by-mail disc rental platform into a streaming video pioneer.

“We were born on DVD and we knew that would be temporary,” Hastings said. “No one thought we’d be mailing discs for the next 100 years.”

Netflix April 16 reports first quarter (ended March 31) fiscal results after the markets close.

 

 

Amazon Prime Video Viewership Revealed

Amazon Prime Video reportedly generated 26 million initial viewers for original programs in early 2017, including 5 million viewers for top shows such as “The Man in the High Castle,” “Transparent,” “Mozart in the Jungle,” and ‘The Grand Tour.”

Subscription streaming video heavyweights Netflix and Amazon Prime Video have staunchly refused to reveal viewership (or ratings) for their ad-free original programs, citing lack of required advertiser justification. It’s a stance that irritates ad-supported TV broadcasters beholden to live-or-die ratings.

Now, internal documents obtained by Reuters reveal in part why original programing is driving Netflix and Amazon to spend $8 billion and $5 billion, respectively, on programing in 2018: New subscribers. It’s growth that drives revenue – and that’s what Wall Street loves.

With Prime Video a free component of Amazon’s $99 annual Prime free two-day shipping membership program, original episodic programs and movies drive subscriber growth, which in turn drives growth of other items on Amazon – including movies.

Unlike Netflix, which reveals (if not champions) subscriber data, Amazon refuses to disclose Prime membership data, which was estimated to top 54 million in the United States at the end of 2015, according to a Consumer Intelligence Research Partners survey.

In a separate 2016 survey from “CutCableToday” of 380 Prime members, 40% said they rented or bought movies not available on Prime Video from Amazon Instant Video on a monthly basis. The survey also found that 20% of Prime members don’t use Prime Video.

“When we win a Golden Globe, it helps us sell more shoes,” Amazon founder/CEO Jeff Bezos told a 2016 tech confab. It’s an outlook CFO Brian Olsavsky drones on monotonously in Amazon’s conference calls.

Reuters reported that “High Castle,” which is an adaption of Philip Dick’s 1962 alternate historical fiction showcasing Axis powers Germany, Japan and Italy having won World War II, cost $72 million in first season production and marketing.

It reportedly generated 1.15 million new Prime subscribers, or about $63 in subscriber acquisition costs – 36% below the annual Prime membership fee.

Netflix Said to be in Talks with Obamas for Original Programs

Netflix is reportedly in discussions with former President Barack Obama and his wife Michelle for a series of original shows aimed at inspiring people.

While no agreements have been signed, The New York Times reports the content – unlike late night TV talk shows – would not be political or platforms aimed at criticizing President Trump or conservatives.

Since leaving the White House, Obama has kept a relatively low profile despite having more than 100 million followers on Twitter and 55 million “likes” of his Facebook page. He and Michelle were reportedly paid more than $60 million for their pending memoirs.

Obama recently appeared on the first episode of David Letterman’s original talk show on Netflix, which has more than 117 million subscribers – including 53 million domestically.

“If you watch Fox News, you are living on a different planet than you are if you are listening to NPR,” Obama told Letterman.

Netflix co-founder Reed Hastings and CCO Ted Sarandos have strong ties to Obama, with Hastings often attending state dinners and Sarandos’ wife, Nicole Avant, serving as the U.S. Ambassador to the Bahamas during the Obama presidency.

Indeed, Hastings reportedly offered to resign earlier this year from the Facebook board over his disagreement with board member Peter Thiel and the latter’s support for Trump. The idea was shot down by Facebook founder/CEO Mark Zuckerberg.

Netflix Adds International Expertise to Board

As Netflix expands globally, so too does its board of directors.

The subscription streaming video pioneer added Rodolphe Belmer, CEO of Spanish satellite TV operator Eutelsat, to its board, bringing the total number of directors to 10.

“We look forward to benefiting from Rodolphe’s wisdom, experience and global perspective as we continue to grow Netflix all over the world,” CEO Reed Hastings said in a statement.

In addition to Hastings and Belmer, Netflix’s board includes Zillow chairman Richard Barton, former Ask Jeeves chairman A. George Battle, venture capitalists Timothy Haley and Jay Hoag, former chief marketing officer Leslie Kilgore, former Pixar executive Ann Mather, Microsoft chief legal officer Brad Smith and former Disney executive Anne Sweeney.

Belmer previously held several roles at French-based Canal + Group, which he joined in 2001, most recently serving as its CEO from 2012 to 2015.

Belmer began his career in the marketing department of Procter & Gamble France before joining McKinsey in 1998. He is a graduate of France’s HEC business school.