Friday, 26 May, 2017

Netflix shares on track for worst day in five months

Netflix looks beyond US as competition mounts Netflix's first-quarter subscriber additions misses estimates
Juana Turner | 19 April, 2017, 01:33

The company recorded a total of 4.95 million net streaming customers additions, down from 6.74 million net adds the year earlier and just off its guidance of 5 million.

Over the past decade, "what really did it for Netflix was the explosion of phones and tablets that allowed people to watch video everywhere", said Wedbush Securities analyst Michael Pachter. Netflix is working towards becoming a global entertainment network.

Netflix added 1.42 million domestic customers in the first quarter, below a 1.5 million estimate and guidance.

For now, Netflix Inc. investors can have rapid subscriber growth or a big jump in profit - not both.

That show could contribute to 100 million subscribers for Netflix.

Progress toward that ambitious goal has helped drive the company's stock price progressively higher over the past five years.

The Los Gatos, California company now has a market value of about $63 billion.

Analysts were expecting slower growth this quarter, after Netflix expanded to more than 130 new countries in the year-earlier period.

Responding to the emergence of "virtual MVPDs" like Sling, YouTube TV and Hulu's upcoming OTT service, the shareholder letter noted: "We believe VMVPDs will likely be more directly competitive to existing MVPD services since they offer a subset of the same channels at $30 to $60 per month, and may appeal to a segment of the population that doesn't subscribe to a pay-TV bundle".

Netflix's investment in original programming has inspired competing technology companies and TV networks up their spending, creating more competition for attention and eyeballs.

Although Netflix is far from a one trick pony, the move of House of Cards from Q1 to Q2 has impacted on operating margins, which rose to 9.7% in the first quarter. Netflix's services extend from $8 to $12 a month, with the most economical option at $10.

"The model works from a consumer perspective because it is such a good value", Pachter said.

"Since our members are funding these films, they should be the first to see them".

Netflix CEO Reed Hastings anticipates the next 100 million subscribers to expand more swiftly than the first 100 million, but he didn't give a particuar schedule during an online video review of the organization's first quarter.

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