With blockbusters like crime drama Narcos, people are addicted to Netflix Photo: Daniel Daza Apparently Kim Kardashian is now one of the 75 million defying God’s intentions for TV. Photo: Lionel Cironneau
Facebook, Amazon, Netflix, Google: 2016 will be critical for internet giants
It was shaping up as a key test for the stock market – and Netflix passed.
The video streaming service was the best performing stock on the US sharemarket last year – rising 134 per cent – and the poster child of the so-called “FANG trade” that saw growth-starved investors piling into a handful of internet stocks with surging revenues, if not profits (namely Facebook, Amazon, Netflix, Google).
In the recent market carnage, the FANG stocks have largely underperformed, and people have been wondering whether the trade had run out of steam. That made Netflix’s earnings all the more important, from an investor perspective. And it seemed to deliver.
The video streaming service added 5.6 million subscribers globally during the quarter, slightly more than Wall Street had expected. It now has 75 million subscribers around the world including, apparently, Kim Kardashian.
Ok I just got a Netflix account. Gonna see what this Making A Murderer is about.— Kim Kardashian West (@KimKardashian) January 18, 2016
The streaming company shares were up by as much as 8 per cent in after-hours trading.
Netflix is still losing money from its streaming business outside the US, and it expects to lose even more – $US114 million ($164 million) next quarter. But it maintained its previous pledge to start delivering material profits from its international operations in 2017.
For better or worse seems to be enough to keep investors happy. Netflix’s rise on the stockmarket last year coincided with a retreat from traditional TV stocks. They appear to be under siege from cord-cutting in the US, as consumers cancel relatively expensive pay TV packages, in favour of cheaper internet services such as Netflix.
To this end, Netflix couldn’t resist a sly dig at its older big media rivals. In its letter to shareholders, the company noted that an executive from traditional television broadcaster NBC had recently said that internet TV was overblown and that old-fashioned linear TV was “like God intended”.
The response from Netflix CEO Reed Hastings and CFO David Wells tells you a lot about the company: “Our investors are not as sure of God’s intentions for TV, and instead think that Internet TV is a fundamentally better entertainment experience that will gain share for many years.”
There wasn’t much mention of Australia, where growth for Netflix said to have slowed, although the company did not that it was “thrilled” to now be available worldwide. It said a recent decision to crackdown on people accessing the US version of the service from offshore, by using virtual private networks (VPN) was done to assuage content companies.