Netflix's 137M subscribers evaporate fears of a free fall

Blowout quarter? It's the kind of formulaic plot Netflix loves.

Joan E. Solsman Former Senior Reporter
Joan E. Solsman was CNET's senior media reporter, covering the intersection of entertainment and technology. She's reported from locations spanning from Disneyland to Serbian refugee camps, and she previously wrote for Dow Jones Newswires and The Wall Street Journal. She bikes to get almost everywhere and has been doored only once.
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Joan E. Solsman
3 min read

Netflix crested over 137.1 million worldwide subscribers in the three months since July, squashing fears that world's biggest paid online TV service might be on the brink of a downslide. US subscribers were nearly double what Netflix had predicted, while its members abroad also surged more than expected.

And it predicted its subscriber additions next quarter would be its best ever. 

The news reassures those worried that a blip in Netflix's subscriber numbers last quarter were an early signal of bad news to come, even as Netflix achieves the milestones of traditional TV. Netflix, for example, snapped HBO's 17-year streak of dominating the Emmy awards in the latest period, as both Netflix and HBO tied at 23 wins. It also mints new stars like Millie Bobbie Brown of Stranger Things and Noah Centineo of To All the Boys I've Loved Before, it noted in Tuesday's results.  

But that means less to Netflix investors and analysts than subscriber growth, the one metric they track obsessively.  

Watch this: Netflix proves it's still growing like crazy

In its third-quarter results Tuesday, Netflix's international subscriber base increased by 5.87 million members to 78.64 million, topping the 4.35 million additions it had predicted in July. In the US, Netflix added 1.09 million streaming customers, for a total of 58.46 million, besting its 650,000 guidance.

Investors rejoiced at the news, pushing shares up 13 percent in after-hours trading.

"We've come a long way in the five years since launching original content on Netflix," the company said in a letter to shareholders Tuesday. It emphasized that even its hit shows, "which are viewed by tens of millions of our members," still account for just a small, single-digit percentage of the total hours the users stream. 

Netflix also stressed how much content it's making on its own, a long-ongoing strategy that takes on new meaning as traditional Hollywood outfits keep announcing their own streaming services to come. Traditional TV and movie giants, grappling with how to compete with new-era behemoth Netflix, are opting to build their own direct streaming subscriptions. For Netflix, not only does that mean more competitor for your wallet -- it also means fewer places it can license popular programming made elsewhere. 

Disney, for example, will pull its movies off Netflix at the end of this year in anticipation of rolling out its own service, sometimes referred to as Disneyflix, next year. WarnerMedia, the AT&T unit that licenses hyperpopular shows like Friends to Netflix, this week unveiled its own plan to launch a streaming service next year. 

Tuesday, Netflix noted that "a growing number of employees are becoming involved in developing content as we migrate to self-produce more of our content vs. only licensing original and non-original content."

Looking ahead, Netflix expects to add 1.8 million streaming members in the US and 7.6 million internationally in the current quarter. That would beat its best-ever quarter for subscriber additions by more than a million people. 

In the current quarter, Netflix predicted 23 cents per share in earnings. On average, Wall Street analysts who track Netflix expected 51 cents.

Overall, Netflix reported a profit of $402.8 million, or 89 cents a share, compared with $130 million, or 29 cents a share, a year earlier. Revenue jumped 34 percent to $4 billion.

Analysts on average expected per-share profit of 68 cents -- matching Netflix's guidance -- and $4 billion in revenue.

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Original story published at 1:08 p.m. PT.
Updated at 1:19 p.m. PT, 1:29 p.m. PT, 1:32 p.m. PT and 1:41 p.m. PT: With more details about results and context. 

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