What’s Driving Netflix’s International Subscriber Growth?

In fiscal 4Q16, Netflix (NFLX) had international streaming revenues of $948.0 million. Its international contribution loss narrowed to $67.0 million. The company expects to turn profitable in fiscal 1Q17 with an expected profit of $16.0 million.

In 4Q16, Netflix had total international streaming memberships of 44.4 million, which exceeded its internal forecast of 43.0 million. It said in its fiscal 4Q16 earnings letter to shareholders that about 47.0% of its members come from international markets. It also said that it’s targeting a 7.0% operating margin on a global basis in fiscal 2017.

As the above graph shows, Netflix had total streaming memberships of 93.8 million in fiscal 4Q16.

Original content has been the key factor that has differentiated Netflix from its competitors in international territories. The company stated in its 4Q16 earnings letter to shareholders that it believes its original English-language content, including Marvel’s Luke Cage and The Crown, is proving to be popular in global markets.

Netflix is offering a mix of local and English-language content in international territories. It believes original content will strengthen its brand and drive up viewing hours. It’s aiming for 1,000 hours of original programming in 2017.

Currently, Netflix holds the content licensing rights to its original content. But its original content is produced by outside studios such as The Walt Disney Company’s (DIS) ABC Studios. Producing its own original content would give Netflix global distribution rights and could add to its revenue in the long term.