Netflix gets boost from strong international growth

Video-streaming service posts improved subscriber growth overseas for the fourth quarter, making up for slower growth in the US.

Ben Fox Rubin Former senior reporter
Ben Fox Rubin was a senior reporter for CNET News in Manhattan, reporting on Amazon, e-commerce and mobile payments. He previously worked as a reporter for The Wall Street Journal and got his start at newspapers in New York, Connecticut and Massachusetts.
Ben Fox Rubin
3 min read

Netflix will air Tina Fey sitcom "Unbreakable Kimmy Schmidt" in March. The series joins a large group of new original shows on Netflix in 2015. Netflix

Netflix's trek around the globe is one that even Marco Polo would deem impressive.

The world's largest online-video streaming company, which produces the eponymous show about the Venetian merchant, released its fourth-quarter results Tuesday. The highlight was the 2.4 million net new international subscribers, offsetting slowing growth in the US, and powering the results past the company's and Wall Street's forecasts. In addition, Netflix said it plans to complete its global expansion plans over the next two years -- ahead of schedule and while staying profitable -- thanks to strong progress so far.

Netflix has been working to quickly expand overseas to keep up its growth, since its the number of new customers signing up in the US -- its largest market -- has been wavering. By pushing to transform itself into a global digital media player, it can more cheaply buy programming from more diverse geographies. So far, the company has made a big push into Europe, launching in France, Germany and other countries in the third quarter, adding to its footprint in Canada, Latin America, and the Nordic countries.

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Shares jumped about 15 percent after hours Tuesday, thanks to the strong subscriber numbers and a better-than-expected 72 percent rise in quarterly earnings.

"It was driven by several markets, so we're really pleased with the growth that we saw," finance chief David Wells said of the quarter during an analyst call Tuesday.

While Netflix is already in about 50 countries, China remains a major market it has yet to tap. In a letter to shareholders, CEO Reed Hastings and Wells said the company is "still exploring options -- all of them modest" in the Chinese market. They said they would like to operate a "small service" in the country if the company receives the needed license.

"We're going to be very cautious and feel our way along through that process if we're able to get that license," Hastings said on the analyst call.

Looking ahead, Netflix expects to add 1.8 million streaming members in the US and 2.25 million internationally in the first quarter, which would bring its total base to 61.4 million.

Tuesday's results mark a reversal from its third-quarter subscriber numbers, which grew at a disappointingly slow clip, due to a price hike. The company's stock sank nearly 20 percent the next day and hadn't bounced back.

Network ambitions

Netflix is working to transform itself into a major online television network to rival the likes of HBO and other cable companies. Such lofty ambitions don't come cheap, and Netflix has been spending heavily on original series and expansion into new countries to keep up its subscriber numbers.

With originals becoming a key to drawing in new members, the company plans to roll out a bunch of new shows this year, including "Sense8," "Daredevil" and "Unbreakable Kimmy Schmidt." Those productions will join existing series, including a new season of the popular political thriller "House of Cards," which comes out next month. In all, the company is launching 320 hours of original shows, documentaries and other videos throughout the year.

But, with HBO introducing a standalone streaming service later this year, and Amazon continuing to build up its own original shows, Netflix should face even more competition in 2015.

In December, Netflix released its most expensive series yet, spending a reported $90 million for 10 episodes of the globally focused Medieval epic "Marco Polo." While the show has factored into Netflix goals of capturing an international audience, the series received mixed reviews from critics though has gotten a much more positive reception from viewers. On Tuesday, the Netflix executives said the show generated "substantial viewing over the holiday season," adding that a second season is planned for next year.

Netflix series 'House of Cards' comes back for a third season next month. Netflix

"I find it hard to believe that you can build sustainably on things that get well-reviewed and not watched," Netflix Chief Content Officer Ted Sarandos said on the analyst call, in defense of some poor critical reviews. "So I'm thrilled that this watched and loved, and I think that is sustainable."

Netflix also said ""="" shortcode="link" asset-type="article" uuid="f35c2daa-898d-41d8-9e6d-6800a4003ade" slug="netflix-will-stream-the-interview-on-saturday" link-text="it will start streaming the controversial comedy " section="news" title="Netflix will begin streaming 'The Interview' on Saturday" edition="us" data-key="link_bulk_key"> to US and Canadian members on Saturday.

For the fourth quarter, Netflix reported a profit of $83.4 million, or $1.35 a share, up from $48.4 million, or 79 cents a share, a year earlier. Excluding a one-time tax-related benefit, earnings in the latest quarter were 72 cents a share.

Revenue grew 26 percent to $1.485 billion.

Analysts polled by Thomson Reuters expected 45 cents a share in adjusted earnings and $1.485 billion in revenue.