Netflix is definitely doing something right. Their fourth quarter report topped analysts' estimates at the end of their first year as an international streaming service. Netflix added 1.93 million domestic subscribers which beat estimates of 1.38 million. The real growth came abroad though as Netflix added 5.12 million international subscribers, again above the 3.78 million estimate. Shares gained nearly 10% to an all-time high of $146 per share and finished up 0.3% following the announcement.
Much of Netflix's success has been attributed to their original programming. New releases of "Gilmore Girls", "Black Mirror", and others helped boost Netflix's subscriber count to over 93 million. By sacrificing short term profits to focus on long term marketing and original content, Netflix has helped build its large audience. Expanding to over 190 countries has also allowed them to start replicating their domestic success abroad. It's certainly working.
Analysts predict a further growth of 1.7 million subscribers next year with international subscribers growing by 3.5 million. Netflix has nearly half of U.S households signed up, but nowhere near that number abroad.
They are spending heavily to continue their global expansion and hopefully achieve the level of success they have in America. With this, their long term budget includes $14.5 billion in programming expenses. A negative cash flow has worked in the past, and Netflix is again forecasting a $2 billion deficit this year.
This growth is a far cry from the Netflix of old. Before hits like "House of Cards" and "Orange is the New Black" came out, Netflix was on the verge of collapse. Although investors, customers, and even Netflix executives hated it, the decision to split the streaming and DVD rental businesses has definitely paid off.