Drubbing analyst expectations, Netflix managed to add 8.3 million more subscribers to its client roster in 2017, including a larger than anticipated 6.36 million outside the US, according to its Q4 2017 earnings report.
After burning cash for three years in the pursuit of content ownership and global expansion, Netflix achieved a market capitalization of $100 billion for the first time, with shares rising 9 percent to $248 on Monday after trading hours, representing a 53 percent improvement over the prior year.
With a customer base in over 190 countries, Netflix acquired 6.36 million subscribers outside the US in the fourth quarter of 2017, following the release of the latest seasons of Strangers Things, The Crown, and Bright. The performance topped analyst predictions that anticipated only 5.1 million subscribers from outside the US.
Despite a price hike in October 2017, Netflix ended the year with a total of 117.58 million streaming subscribers around the world.
In Asia-Pacific, Netflix competes head-on with Iflix, a subscription video-on-demand service based on a localised content-acquisition model and reliant on bundling its services with distribution partners such as device manufacturers and telecommunications companies.
After pulling its content from Netflix, Disney named Iflix its preferred content distribution partner, a decision it is expected to reverse following the launch of Disney's own service in 2019 as a step up to its Fox acquisition.
Amidst the good news, Netflix took a $39 million noncash charge for content that was withheld from release, an area speculated to be related to Kevin Spacey, following accusations of sexual misconduct which halted the production of House of Cards and the release of the film Gore.
The company expects to double its negative cash flow in 2018 to $4 billion in the pursuit of original content, global expansion, and customer acquisition. Switching from red to green in cash flows will require partners that accelerate speed to market, lower customer acquisition costs, and lower costs of borrowing.
Sorry, brands, ads are not coming to Netflix
Echoing a Q4 2017 letter to shareholders, Reed Hastings, co-founder and CEO of Netflix, asserted in a video call posted Monday that keeping Netflix commercial free is a key differentiator. The comments appeared to be aimed at dispelling speculation that advertising would become part of the company's business model.
"We are having great success on the commercial-free path,” said Hastings. “That is what our brand is all about. So we're going to continue to expand the relevance of a commercial-free service around the world and make that so popular that consumers are very used to and appreciate Netflix."
"Some people are just not comfortable buying off the internet, doesn't matter if it's $1 or $10," said Umair Kazi of Ishtehari. "So I feel that an ad-supported model can do wonders for lower-income markets, but only if it's truly free and doesn't require me setting up my credit card."
"Netflix would rather maintain the premium-ness of its platform and focus on creating quality content, as opposed to being sidetracked by the ad-supported model," said Sumit Ramchandani, the head of SEA at Lion & Lion. "We, however, won’t rule out the possibility of select Netflix content being distributed through other platforms that choose to offer content on an ad-supported, free-to-air or a low-cost subscription model."
The 2018 marketing budget was increased to $2 billion, up from $1.28 billion in 2017, with Hastings adding that the overlying strategy for Q1 2018 would be to improve the organic reach of via channel partners, social platforms, and PR primarily, with less focus on paid marketing.