Netflix boke through 100 million subscribers globally to reach 104 million paid subscriptions in the third quarter of 2017, slightly exceeding its own forecasts. Its paid subscriptions have increased by almost a quarter in a year and international subscriptions now exceed those in the United States.
Netflix gained just over a million paid subscribers in the United States, ending the quarter with 51.35 million, and added just under 4 million elsewhere for an international total of 52.68 million.
The company is forecasting a global increase of 5.05 million paid subscribers for the fourth quarter, which would take it to just over 109 million at the end of 2017.
The forecast growth is slightly lower than for the same period in 2016, when it achieved record net additions. It takes into account a recently announced price rise and possibly allows for the company to exceed its own expectations.
Quarterly revenue was up 30% year on year to just under $3 billion, with operating income at $209 million, an operating margin of 7%. Quarterly net income was up to $129.59 million, compared to $51.51 million the same period a year previously.
However its content obligations, or contractually committed programming costs, have now increased to $17 billion. It plans to spend an unprecedented $7-8 billion on programming in 2018.
In its quarterly announcement, Netflix said: “We spend disproportionately in the US to generate media and influencer awareness for our programming which we believe, in turn, is an effective way to facilitate word of mouth globally.”
Netflix acknowledged that while it still has multi-year deals in place with other media companies, the long-term trends are clear. “Our future largely lies in exclusive original content that drives both excitement around Netflix and enormous viewing satisfaction for our global membership and its wide variety of tastes.”
It said: “Our goal is to work with the best creators in the world and own the underlying intellectual property so that we can continue to deliver amazing content to our members across the globe.”
While traditional networks are embracing direct-to-consumer services, Netflix is increasingly working with other service providers to bundle its services, in addition to its core direct membership model.
David Wells, the chief financial officer of Netflix, said in an earnings interview that the general adoption on online video continued to the strongest force driving subscriber additions, admitting that it is difficult to relate it to factors such as particular programmes.
“It is the continued adoption of internet entertainment that is driving our growth and it’s really helped more and more by the increasing strength of our content slate, notably our global originals,” he said.
Ted Sarandos, chief content officer, added: “I think it might be just a reflection of the steady drumbeat of high-quality content that people are watching.”
In the past quarter, he said, Netflix released 8 original movies. It plans to release about 80 in the coming year, ranging from million dollar productions to much larger scale projects.
Reed Hastings, the chief executive said “Our focus is on doing even better content, getting better partnerships, better mobile streaming.”
Asked to sum up the sustainable competitive advantages for Netflix, he preferred to talk about the sweater he was wearing to promote a new season of Stranger Things.