×
You will be redirected back to your article in seconds

Netflix Blasts Past Q4 Subscriber-Growth Expectations, Shares Soar to All-Time High

Company expects to boost marketing spend by 50% in 2018, to $2 billion

Netflix reeled in 8.3 million new streaming subscribers — including almost 2 million in the U.S. — handily beating Wall Street estimates for the fourth quarter of 2017.

The record quarterly subscriber additions pushed shares of the company up more than 9% in after-hours trading. That came after Netflix shares closed up 3.2% Monday at $227.58 per share — an all-time high closing price for the stock — prior to the release of the Q4 results.

For Q4, Netflix added 1.98 million U.S. streaming subs and 6.36 million overseas. That was well above the Wall Street forecasts of net adds of 1.28 million streaming subscribers in the U.S. and 5.02 million internationally (roughly in line with Netflix’s previous guidance).

“We had a beautiful Q4, completing a great year as internet TV expands globally,” company execs said in their quarterly letter to shareholders. As of the end of 2017, Netflix had 117.6 million streaming members worldwide.

Netflix’s fourth-quarter 2017 revenue of $3.29 billion and earnings of 41 cents per share were in line with analyst expectations.

The boost in total subscribers came even as Netflix began instituting broad price increases in Q4, including in the U.S. Starting last fall, American customers on the standard two-stream plan started to see their fees increase from $9.99 to $10.99 per month.

As a result of the price hikes, Netflix’s global streaming revenue grew 35% in Q4 compared with the year-earlier quarter, faster than the 25% growth in average paid streaming memberships.

Netflix originals that debuted in Q4 included “Bright,” the big-budget action flick starring Will Smith. The film was a dud with most critics but drew a healthy 11 million U.S. viewers in the first three days of its Dec. 22 release, Nielsen estimated. Netflix announced plans for a “Bright” sequel this month. In its first month, “Bright” has become one of Netflix’s most-viewed original titles ever, the company said (but didn’t provide specific metrics).

During the fourth quarter, Netflix took a $39 million charge for “unreleased content we’ve decided not to move forward with.” The company didn’t provide any details in the shareholder letter about what that content was. [UPDATE: On the company’s earnings interview, CFO David Wells said the charge was “related to the societal reset around sexual harassment,” which appeared to be a reference to projects it canceled with Kevin Spacey after the actor was accused of sexual assault.]

Also in Q4, Netflix launched returning seasons of “Stranger Things,” “The Crown,” and “Black Mirror” and launched new series including “Godless,” “Marvel’s The Punisher” and David Fincher’s “Mindhunter.”

Netflix also disclosed plans to ratchet up marketing spending more than 50% in 2018 –increasing it from $1.3 billion to $2 billion. That’s “because our testing results indicate this is wise,” the company told shareholders. “We want great content, and we want the budget to make the hits we have really big, to drive our membership growth.”

After its huge Q4 for net adds, Netflix expects the momentum to continue. For the first quarter of 2018, the company is forecasting 6.35 million new streaming customers (versus 5 million in the year-ago quarter), comprising 1.45 million domestically and 4.9 million internationally.

In addition, the company said it expects to raise even more debt financing to produce original content. Netflix is forecasting free cash flow of negative $3 billion-$4 billion in 2018. Netflix plans to spend $7.5 billion-$8 billion on content in 2018 on a profit-and-loss basis, in line with guidance it provided investors last quarter.

“Given our track record of content investments helping to increase growth, we are excited about the growth in future years from the increased investments we are making in original content this year,” the company said.

Also Monday, reflecting its growing global footprint, Netflix announced the addition of Eutelsat CEO Rodolphe Belmer to its board. In naming Belmer, formerly CEO of France’s Canal+ Group, to its board, Netflix noted that a “large and growing percentage of our members are European.”

More Digital

  • Michael Uslan's U2K Becomes Asia-Hollywood Formats

    Michael Uslan's U2K Becomes Asia-Hollywood Formats Pipeline (EXCLUSIVE)

    Michael and David Uslan, the father and son producing team with credits that include “The Dark Knight” and “Sabrina: Secrets of a Teenage Witch” have struck a cluster of deals that makes them a two-way conduit for TV formats between Hollywood and Asia. U2K, a company that includes the Uslans and Jon Karas (“Believe in [...]

  • Dish Testing Flixpert Content Recommendation Service

    Dish Tests Movie Recommendations App Flixpert (EXCLUSIVE)

    Dish and its corporate sibling EchoStar have quietly been testing a movie recommendations platform called Flixpert, Variety has learned. Flixpert promises to help people find movies to watch through recommendations from friends and trusted contacts; Dish has been testing mobile apps for the service with a few hundred users. Online footprints suggest that Flixpert has [...]

  • Craig Hunegs WB

    Craig Hunegs to Exit Warner Bros. TV Group and Digital Networks (EXCLUSIVE)

    After nearly 25 years in the Warner Bros. family, Craig Hunegs is exiting his post as head of business for Warner Bros. TV Group and president of the studio’s digital networks wing. Hunegs said he has been discussing his exit with Warner Bros. chairman-CEO Kevin Tsujihara for the past several months. At a time of [...]

  • Google Placeholder

    Google Accelerates Google+ Shutdown Following New Privacy Mishap

    Google will shutter its struggling social network Google+ sooner than previously announced: The company said Monday that Google+ will shut down in April of 2019. It also disclosed a new security vulnerability that briefly exposed personal data of some 52.5 million Google+ users. The bug, which was introduced to Google+ in November, allowed developers to [...]

  • Eddie Lazarus Sonos

    Sonos Hires Tribune General Counsel Eddie Lazarus as Chief Legal Officer

    Smart speaker maker Sonos has hired former Tribune exec Eddie Lazarus as its new chief legal officer. Lazarus will be in charge of all legal, regulatory, compliance and SEC reporting issues, among other things. Prior to joining Sonos, Lazarus worked as general counsel and chief strategy officer for Tribune Media. Before that, he was chief of [...]

  • Rhapsody, Sony Music to Launch Spotify

    Rhapsody, Sony Music to Launch Spotify Competitor in Japan

    Rhapsody and Sony Music Entertainment today announced a partnership to launch what they describe as the first on-demand, high-resolution streaming music service in Japan. Rhapsody International is providing its “Powered by Napster” platform including a set of systems, tools and APIs to allow SMEJ to quickly launch and bring its on-demand service to market. The service, [...]

  • Vidcon Sarah Tortoreti

    VidCon Has a New Marketing Chief: Nickelodeon's Sarah Tortoreti

    VidCon tapped Sarah Tortoreti as VP of marketing to head up the digital-creator and video confab’s promotional strategies worldwide. Tortoreti joins VidCon from Viacom’s Nickelodeon, where she was director of marketing and brand strategy since April 2016. In early 2018 Viacom acquired VidCon, founded by veteran YouTube creators Hank Green and John Green. In the newly [...]

More From Our Brands

Access exclusive content