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Netflix answers slowing domestic growth with international expansion

January 22, 2015

Netflix plans to operate in 200 countries by the end of 2016. The video streaming service, which is already present in 50 countries around the world, also revealed encouraging global user growth for the fourth quarter of 2014, offsetting a slowdown in new U.S. users.

The company, led by CEO Reed Hastings, has placed international growth high on its agenda as growth in the U.S. has slowed. At the end of the fourth quarter, Netflix had 39 million members in the U.S, up 1.9 million from the previous quarter. In the same period last year, 2.3 million subscribers were added. Netflix expects that growth to slow further in the next quarter.

In a statement to shareholders, the company went back on its conclusion last quarter that the slowdown in U.S. growth was due to an increase in prices, saying the slowdown is a “natural progression.”

In contrast to user numbers in the U.S., the company’s growth across the globe is accelerating.  In the fourth quarter of 2014 Netflix added 2.43 million members, compared to 1.74 million a year ago. At the end of the current quarter services will be added in Australia and New Zealand, and further countries will be added before the end of the year. Netflix is also exploring “modest” options in China.

“Progress has been so strong that we now believe we can complete our global expansion over the next two years, while staying profitable, which is earlier than we expected. We then intend to generate material global profits from 2017 onwards,” the Netflix statement to shareholders read.

On the financial side, Netflix hit expectations. Net income for the quarter stood at $83 million compared to $48 million a year earlier. However, this jump was due to  the company resolving prior year tax audits and taking that into account, income would have been $45 million on a pro-forma basis. That number still beat forecasts of $27 million, which Netflix attributes to lower than expected international losses and other tax benefits independent of the $39 million tax reserve release.  The company is forecasting profits to drop in 2015 compared to this year, due to the international expansion.

Shares in Netflix closed Tuesday at $349.40, and have jumped significantly since the quarterly earnings were announced, ending Thursday at $428.29.

Netflix Inc. – Quarterly EPS | FindTheBest

 

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Filed Under: Consumer, North America, Social

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