Netflix close to 100M subscribers, but additions fall short in Q1

Netflix corporate headquarters

Netflix is getting ever so close to eclipsing the 100 million streaming subscribers total, but its net additions for the first quarter came up short of expectations.

Netflix added 4.95 million (1.42 million domestic and 3.53 million international) new streaming members in the first quarter. The company predicted it would add 5.2 million new subscribers (1.5 million in the U.S. and 3.7 million internationally). In all, the company now has 98.5 million total subscribers.

Looking ahead to next quarter, Netflix expects to add another 3.2 million subscribers and push its total to 101.95 million.

Netflix shifted the premiere dates for some of its popular shows (like House of Cards) from the first quarter to the second quarter, a move which raised operating margins this quarter but also lowered net subscriber additions.

“We have come to see these quarterly variances as mostly noise in the long-term growth trend and adoption of internet TV. For the first half of this year, for example, we expect to have 8.15 million net adds, compared to 8.42 million net adds in the first half last year,” the company said in a statement (PDF).

Now officially a year out from its international launch and the big initial demand, Netflix saw its international subscriber adds drop 22% year-over-year. However, international revenue jumped 62% year-over-year.

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As subscriber totals continue to grow for Netflix, so does its slate of content, thus demanding more marketing muscle out of the SVOD giant. As expected, Netflix is expecting to spending heavily on marketing this year, with the budget set at more than $1 billion for 2017.

“Netflix has done a very good job driving subs via non-traditional forms of marketing—much better than traditional networks,” wrote Jefferies analyst John Janedis in a research note. “As both penetration and competition increase, NFLX may find a need to augment its current marketing with more traditional platforms.”

As part of its marketing budget, Netflix said it will increase its investment in programmatic advertising in order to better personalize messages for consumers on a larger scale.

Netflix also took some time in its earnings release to address competition, namely the ever-widening crop of virtual MVPDs including Sling TV, DirecTV Now, PlayStation Vue, YouTube TV, FuboTV and Hulu’s upcoming service.

“… We don’t think it will have much of an impact on us as Netflix is largely complementary to pay TV packages. Our focus also is on on-demand, commercial free viewing rather than live, ad-supported programming,” the company wrote.

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Netflix also tried to calm any concerns over one of its main competitors, Amazon, landing the rights to live streaming NFL Thursday Night Football games.

“That is not a strategy that we think is smart for us since we believe we can earn more viewing and satisfaction from spending that money on movies and TV shows,” Netflix said.