From its small beginnings in 1997, Netflix has now reached 44 million US subscribers. With $1.18 billion in revenue and an additional 2.33 million subscribers, Netflix has exceeded the projections of investors for Q4.
For investors, the news is the latest in a strong period of growth for Netflix after a near disaster with company stock in 2011 when CEO Reed Hastings attempted to split the company into two divisions: Netflix for streaming movies and Qwikster for DVDs and video games. With two separate websites, billing accounts, and other headaches, the idea was abandoned before it ever got out of the gate. In 2011, the stock was up to almost $300 a share with values falling over 80% to $60 by the end of the year. Since then the stock has climbed past the $300 mark and the momentum is still growing.
One of the reasons for the growth is the fact that Netflix has had a cultural impact on television and movies in a similar way that VHS did in the 1970s. Suddenly, the movies could come home and play on your TV via a rectangular plastic box with magnetic tape inside rather than fading into obscurity after the movie finished its run at theaters. Fast forward to the dawn of the internet in the 1990s, and Netflix brings the movies to our computers, and later our phones, tablets, and just about any electronic device with a screen and an internet connection. At first glance you would think movie studios would be happy about additional revenue, but that is not necessarily the case.
At the Film Independent Forum in Los Angeles in 2013, Netflix proposed an idea to major studios of releasing movies the same day on Netflix as in the theaters. Studios are focused on revenue streams generated from various movie theater chains, syndication on cable and satellite, along with video on demand services we all know from our hotel rooms. While movie studio executives may balk at the idea, it certainly has public appeal.
Imagine the instant gratification of seeing The Avengers 2 at home the same day it comes out in theaters. It can be an appealing prospect for those who do not care for the trappings of the expensive cinema where an evening for two can easily push into the $50 range. Even if Netflix has to cave and charge a small premium, say $10, for a new release rental, the ability to watch a movie is definitely the cheaper option for the consumer.
Netflix is also producing its own original content, with the most notable being season 4 of Arrested Development which was released all at once rather than one per week over half a year. Orange is the New Black, House of Cards and Hemlock Grove are all original shows that Netflix is producing for their service. The content is good. So good, in fact, that they have earned their first Oscar nomination to go along with the Emmys they have won for House of Cards.
In addition, Netflix has a deal with Marvel for original content based around their comic book characters, which our own Niki Cruz reported on back in November.
So what is next for Netflix? Netflix has already announced support for the new 4K format which will one day replace the now standard 1080p HDTV. Streamlined subscription plans such as the ones Engadget reported on at $9.99 for three-screen streaming is also in the forecast. International growth is also a big goal for Netflix as Canada, Europe and South America are seeing explosive growth digital content consumption.
You can view the Q4 results for yourself here.