For its third quarter earnings, Netflix reported a record best $2.15 billion in revenue. It shows a 36% increase over last year. They also reported 3.6 million new subscribers. It is a positively wide gap from their projected $2.3 million revenue.
In a letter to investors, the company said that the excitement surrounding their original content is the driving force behind the company’s over-performance. They also acknowledged how the Netflix-produced and -owned Stranger Things provides the company “with more attractive economics and greater business and creative control.”
As such, they owe much of the progressive results to the success of Netflix original series titles, such as Stranger Things and Narcos.
Exceeding Analysts’ Expectations
The quarterly sales of Netflix passed the $2 billion mark for the first time in the third quarter of 2016. In line with this, shares of stocks soared as high as 20% after hours. International subscriber growth and original series titles, such as Strange Things and Narcos contributed to this better-than-expected outlook.
There is a noticeable difference between the actual third quarter earnings share of 12 cents per share on revenue of $2.29 billion and Thomson Reuter analysts’ expected earnings of 6 cents per share on revenue of $2.28 billion. For this reason, among others, the company is pleased with such progress in the fourth year of their original content strategy.
Creating Original Content
A diversity of original content, together with local-language offerings abroad, caters to multiple demographics and appeals to a wider audience.
Chief content officer Ted Sarandos said that original content gives the company more flexibility regarding the rights to them. The original content has no studio mark-up but requires more cash up front. According to Sarandos, however, this is a worthy trade-off for efficient and high quality content.
Netflix aims to add 5.2 million new memberships in the fourth quarter of 2016. They expect 1.45 million new memberships in the United States and 2.75 million more worldwide.
In relation to this, they announced availability in 22 languages and an expansion into 130 new countries. They planned this move with the hope to strengthen subscriber growth. Some executives, however, cautioned the company that they might not profit from the expansion for a number of years.
On another note, the company aims to release over a thousand hours of premium original programming in 2017. They also plan to grant existing online service providers in China with a license to their content in the near future.