Overseas Growth Propels Netflix Past 50 Million Subscribers

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The streaming service added more subscribers than it previously projected

Netflix now possesses more than 50 million subscribers, a milestone the company disclosed Monday in its second quarter earnings release. While the bulk of the company’s subscribers reside in the United States — 36 million and counting — the growth is accelerating most overseas, where the company’s subscriber base has grown 78 percent year over year.

“This is an enormous moment in history as on-demand Internet services are coming to the fore across the world,” Netflix CEO Reed Hastings said on the company’s earnings call. Netflix was nervous user growth would slow during the World Cup, but it continued unimpeded — even in Brazil.

The company’s earnings and revenue were about in-line with analyst expectations, as it reported revenue of $1.34 billion (analysts said $1.33 billion) and earnings per share of $1.15  (analysts said $1.16). With numbers coming in as expected, the subscriber growth motivated investors, who pushed the stock up a smidge in after-hours trading.

Netflix beat its own predictions in terms of subscribers, adding 1.69 million worldwide instead of the 1.46 million customers it forecast.

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Netflix credited its “ever-improving content offering,” which is its way of praising its original series. The second season of “Orange Is the New Black” debuted on the service in this latest quarter, and the show racked up 12 Emmy nominations a couple months later.

That show was the most popular series in every country in which it debuted, reinforcing Netflix’s belief that its formula will be as successful in other territories as the United States. Netflix projected it would add another 2.36 million paying international customers in the coming quarter.

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The service’s growing popularity overseas is fueling expansion into markets such as France and Germany.  That expansion will cost quite a bit, so Netflix’s international businesses will not be profitable just yet.

However, CFO David Wells said Netflix would break even in existing markets if the company stopped expanding. That won’t happen, since Netflix is addressing just one-third of global broadband households.

“Our broad success from Argentina to Finland has convinced us to further invest aggressively in global expansion,” the executives said in a letter to shareholders.

Netflix’s ambitions overseas will invite further comparisons with HBO, whom Hastings called a peer on the call Monday. (Hastings and HBO’s top executives have traded barbs in the past).

While Netflix is larger than HBO in the United States, HBO has far more viewers overseas. Netflix is eager to change that. Hastings and chief content officer Ted Sarandos dismissed questions about idiosyncrasies of various territories, such as France’s rules regarding local production.

Netflix will invest in local productions, Hastings said, joking that the company debated making a “House of Versailles.”