Netflix new subscriber numbers for Q2 have surpassed forecasts that the company set for itself. This may not be too surprising considering that numbers of new customers also rose in Q1, but the sheer numbers have outweighed expectations of not only Netflix but also industry observers. Netflix anticipated 3.2 million new subscribers but actually attained 5.2 million, with over 4 million from overseas and the rest from the domestic market. Around half of the company’s membership base is now made up of international subscribers, an indication that Netflix is succeeding in its bid to drive international contribution profit.
Subscriber growth is the main indicator of fiscal achievement in a company such as Netflix, and the Q2 success has led to stock rising by almost 9 percent. In the latest earnings report, Netflix referred to the company’s “strong slate of content” as the reason that acquisitions across various territories have outstripped expectations, and particularly mentioned the international first-party content. The company also announced $2.79 billion revenue leading to 15 cents per share earnings, again a higher number than analysts’ expectations of $2.76 billion revenue and 16 cents per share earnings. Netflix’s strategy of providing original content seems to be paying off and considering this, the company’s plans for $6 billion spending on such content in 2017 may rise further.
Despite the fact that Netflix still has significant negative free cash flow, expected to be around negative $2 billion this year, the company continues to develop its platform with new initiatives, such as the recent introduction of interactive storytelling content and the introduction of support for Dolby Atmos. Last month a report showed that Netflix had 50.85 million subscribers in the U.S., even more than the 48.61 million cable-pay TV customers, overtaking cable TV numbers for the first time. As well as the high-quality original content, the simplicity of accessing Netflix content without the need for a TV or cable box, and also the cheaper cost, are hitting the mark in attracting new subscribers. Going by the latest Q2 figures, it appears that the threat to cable companies will only continue to grow unless those providers can start thinking of new ways to compete against Netflix.