Netflix, now available globally, gained 4.55 million international paid subscribers in the first quarter of 2016. It now has 31.99 million international subscribers. In the United States Netflix added 2.31 million for a total of 45.71 million. It was the highest quarterly growth yet for Netflix, facing increasing competition from Amazon, which is now offering its streaming service on a standalone subscription basis.
Netflix is continuing to attract customers to its subscription video service, which is now available virtually worldwide, with China being the notable exception.
Over 40% of Netflix subscribers are now outside the United States but the company continues to run at a loss internationally as it invests in growth in these markets.
In the second quarter of 2016, Netflix expects to add another 0.7 million subscribers in the United States and 2.3 million internationally. The cautious forecasts may have disappointed investors.
Many early adopters of Netflix in the United States will also face price increases of around a couple of dollars a month. The company says it expects “only modestly increased churn” as a result.
Reed Hastings, the chief executive of Netflix, told analysts: “We’re seeing growth in the overall internet TV market. Of course, that’s displacing linear TV, and it’s natural that everybody is coming in as they realize that the future is internet TV.”
Yet Netflix is focusing on its own original programming, that it can distribute globally, and is less interested in national networks or live television. “We know what we want to be, which is a great global producer and distributor of content and other people will do other things,” he said.
“You should think about our brand proposition as very much about on demand,” said Ted Sarandos, who is responsible for programming at Netflix.
So far, Netflix has focussed on streaming and has not enabled downloading. “We’ve been so focused on click and watch and the beauty and simplicity of streaming,” Reed Hastings explained. “But as we expand around the world where we see an uneven set of networks, it’s something we should keep an open mind about.”
Netflix now faces increased competition from Amazon, which is investing in its own original programming. Amazon is now offering its Prime Video as a standalone service for $8.99 a month in the United States, although it remains cheaper to pay annually.
Amazon is also providing partnerships with third parties, including Showtime and Starz, to boost its programming offering in the United States. Customers can add subscription programming from around 20 partners and will be able to pick and choose on an à la carte basis month by month.
Other programming available through Amazon includes Smithsonian Earth and NatureVision documentaries.
The add-on subscriptions are available through the Amazon video app on supported devices. Customers can also use their Amazon account details to sign on to the standalone apps of participating partner services.
Amazon does not disclose its Prime Video figures, although it said the number doubled in 2015.
Netflix is in more than 5 million households in the United Kingdom, according to BARB survey data, while Amazon is in around 1.6 million.
The total revenues for Amazon in 2015 were $107 billion, with a net profit of $596 million. In comparison, Netflix had revenues of $5.5 billion in 2015 and a net profit of $266 million.
Netflix has a clear proposition as an online video service. Amazon has an amazing brand but is less well known for its online media offerings, despite having a larger library of movie and television titles. With a standalone video offering, Amazon is now competing directly with Netflix. By aggregating third-party services, Amazon has the potential to become a more significant video player.