Netflix (NASDAQ:NFLX) published their Q3 earnings to great fanfare from investors yesterday. Stock prices immediately rose 11% on the day, while after hours trading steadied the stock back a small amount from the initial jump. The stock has been volatile this year, starting at $200 and reaching a peak value of $423 in June, then going up and down for the rest of the year, closing at $346 yesterday.
In an interview with Eric Sheridan CEO Reed Hastings and the executive team gave some insights into how they managed to grow over the third quarter. The first point they made was partnerships in device integration across different markets. For instance in the US Comcast now allows customers to add Netflix directly to their bill, and provide a “channel” for Netflix on some of their boxes. They also started working with carriers to preload the application on some android phones, specifically a pilot program with Verizon this year. The company raised prices for their subscribers at the end of 2017, which also started to see raised revenues combined with the efforts around lowering barrier to entry with bundling raised revenue over the year steadily. What’s remarkable from their earnings is that the DVD business is still operating although as a smaller share of revenue with each quarter that passes.
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Competition has been heating up, with Disney (NYSE:DIS) estimating their release for the end of 2019, and other tech companies investing in original content the fight is approaching from both fronts. Netflix claimed their defense strategy against these competitors is to create more original global content that people want to watch to add value to Netflix subscriptions. For the record, Netflix produced shows had over 112 Emmy nominations, and 23 wins (a tie with HBO for the most). Netflix also started testing out putting promotions for their content between content users were watching, users were not very happy about this decision and were vocal about it. Netflix did not comment on how the test went or their future plans to introduce ads between streams again.
Netflix – Q4 2018
Q4 for Netflix typically has less profit because of the way the movie licenses are paid out during the year, so they advised that although it will likely be better than Q4 2017, shareholders should expect a typical slump in December profits but should expect net gains in subscriber count again. Its difficult to imagine any domestic growth is left for Netflix, so international subscribers seem to be the likely target next quarter.
Source: Netflix Investor Relations
