Detailed in Netflix’s third quarter earnings, the streaming video company significantly beat expectations by more than one million subscribers. Originally forecasting an increase of two million international subscribers and 300,000 based in the U.S., Netflix reported a rise of 3.2 million new international subscribers as well as 370,000 additional subscribers located in the United States.
This leap surprised investors as expectations were previously conservative due to the 25 percent price hike that kicked in for current subscribers during the third quarter of 2016. In a letter to shareholders, Netflix CEO Reed Hastings attributed growth to the company’s growing library of original content such as Stranger Things, Luke Cage and The Getdown as well as the second season of Narcos.
Likely good news for subscribers, Hastings indicated that the company would not be “cracking down” on subscribers sharing passwords. In addition, there’s currently no discussion within the company related to additional price hikes. On the subject of a rumored offline viewing feature, Hastings mentioned that the company was looking into the possibility, but didn’t offer any details on a future launch date.
The earnings report indicated that “self-producing” original content is less expensive than licensing content from studios and networks. It’s likely that the library of licensed content on Netflix will continue to shrink while more original, exclusive shows are released on the streaming service.
The report also promoted the upcoming American-British drama series called The Crown debuting on November 4, calling it a mixture of Mad Men, House of Cards and Downton Abbey. Netflix is expected to increase the total hours of original streaming content from 600 hours in 2016 to more than 1,000 hours in 2017, specifically due to an investment of $6 billion in original programming.
After the news broke about the increased subscription rates, the stock price of Netflix shot up 20 percent from roughly $100 a share to $120 a share in after-hours trading. For the fourth quarter of 2016, Netflix is forecasting an increase of 1.45 million subscribers in the United States and 3.75 million new international subscribers. In total, Netflix now has more than 86 million streaming members.
