Netflix reports paid customers rise on strength overseas

Netflix

NETFLIX Inc. continued to expand its customer base at a rapid clip in the fourth quarter thanks to strong growth overseas, but higher content spending weighed on the streaming-video giant’s profit and it forecast a slowdown in revenue growth for the current quarter.

Netflix added 8.8 million paid subscribers in 2018’s final quarter, up 34% compared with the year-earlier period. It previously forecast gaining 7.6 million new paid subscribers, and analysts polled by FactSet predicted 7.5 million.

Revenue grew 27% to $4.19 billion, less than the $4.21 billion analysts expected. The company forecast revenue growth of 21% for the first quarter—a pace that most media companies would relish but is slower than normal for Netflix.

Profit fell to $134 million, or 30 cents a share, down 28% from $186 million, or 41 cents a share, a year earlier. Its operating margin fell due to the number of new titles that launched in the quarter. Netflix’s stock was more than 4% lower in after-hours trading.

Netflix earlier this week raised prices for all of its subscription plans, a move that fortifies its aggressive spending on content in the face of stepped-up competition.

Companies including AT&T Inc.’s WarnerMedia and Walt Disney Co. are preparing their own content-streaming services that are slated to launch later this year. They will be competing with Netflix to sign up consumers and stock their services with content. Their entry could drive up Netflix’s programming costs, including for popular reruns.

Netflix said Thursday it was “ready to pay top-of-market prices for second run content.” At the same time, It is also making more of its own content in-house as it ultimately wants to be less reliant on outside suppliers for original shows and movies.

Typically resistant to providing viewership data, Netflix is becoming more transparent. It said over 80 million member households watched the horror thriller “Bird Box” in its first four weeks on the site. The stalker drama “You,” which originated on Lifetime, will be watched by over 40 million member households in its first month, Netflix estimated. The show flopped on Lifetime and now new episodes will be exclusive to Netflix.

In the past Netflix executives have argued that publicizing viewing data didn’t make sense for the company, since it doesn’t sell advertising. But strong viewing numbers can strengthen Netflix’s appeal to Hollywood talent and give investors confidence that its big-ticket investments in content are yielding results.

Netflix said in the U.S. its content accounts for 10% of its subscribers’ television screen time. The company said in its letter to shareholders that “Fortnite,” a videogame, was a bigger threat to screen time than AT&T’s HBO.

Subscriber growth for Netflix came from overseas. The company is increasingly developing television shows and films, such as the Spanish-language movie “Roma,” meant to appeal to audiences outside of the U.S. It has also focused on productions able to attract a wide audience across its subscriber base. - WSJ

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