Netflix gained nearly three million paid subscribers internationally in the third quarter of 2016, but only added 475,000 in the United States, which is the lowest gain in the third quarter for some years. Netflix now has 83.28 million subscribers worldwide. Its chief executive compared the growth of internet television to the mobile phone. There are 4.7 billion mobile phone subscribers globally, so Netflix still has some way to grow. Meanwhile Netflix is aiming to overtake CBS in spending on programming.
Netflix now has 36.80 million paid subscribers internationally and 46.48 million in the United States. The subscriber gains were higher than Netflix had forecast, after failing to meet its own expectations the previous quarter.
Over a twelve-month period, Netflix added 12.85 million subscribers internationally, compared to 9.56 million the previous twelve months, when the service was available in far fewer countries. Since adding 130 territories at the beginning of 2016, Netflix gained 9.36 million international subscribers. That is a lot by any standards but is from an addressable market of nearly 800 million broadband homes.
Netflix added 4.41 million subscribers in the United States over twelve months, compared to 5.80 million the previous twelve months. The number of subscriber additions for the third quarter was the lowest in five years. This suggests that the opportunity for further domestic growth is diminishing, although Netflix says that in the longer term it is still aiming for 60 to 90 million subscribers in the United States.
The company forecasts that it will gain 3.75 million subscribers internationally in the fourth quarter, with 1.45 million in the United States.
Quarterly global streaming revenue exceeded $2 billion for the first time, up 36% year over year to $2.2 billion, of which 40% was generated abroad.
The company is continuing to operate at break even, although it promises to generate material profits from 2017 onwards.
Netflix doubled the amount it spent on programming between 2013 and 2015, from from $2.38 billion to $4.91 billion.
Netflix aims to release over 1,000 hours of original programming in 2017, up from 600 hours in 2016. In total it will spend $6 billion on programming. That is more than CBS spent in 2015, and second only to giants like Disney and ABC or NBC Universal.
Worldwide, around $130 billion a year is spent on television programming, with $47 billion of that in North America, $39 billion in Western Europe, and $28 billion in Asia Pacific, according to IHS Markit.
Although Netflix still hopes to offer a service in China eventually, it says the regulatory environment is challenging and it plans to licence programming to local providers rather than operate its own service.
Reed Hastings, the chief executive of Netflix, told analysts: “We generally think of the growth of Internet TV like the growth of the mobile phone. That is, fixed-line telephony was an amazing invention — 100 years of development and brought incredible benefits to society — and the same thing is true with linear TV. It’s been an amazing innovation but the age of linear is starting to fade and is going to be replaced by Internet.”
He added: “eventually, movies and TV shows will be global, ubiquitous, some amazing budgets. So I think you have to think big about the future.”
Although Netflix has over 80 million subscribers, and probably many more users, he reminds everyone that Facebook and YouTube have over a billion active users every day. So in some ways Netflix has a long way to go.