What’s Driving Netflix’s US Subscriber Growth



Netflix in the United States

Netflix (NFLX) recorded streaming revenues of $1.5 billion in the United States, up 25% year-over-year. The company had a contribution margin of 37.2% in fiscal 2Q17 and total streaming memberships of 51.9 million in the United States.

Netflix had net additions of 1.1 million members in the United States (SPY) in fiscal 2Q17, which was its highest level of net additions in the second quarter since fiscal 2Q11. In fiscal 3Q17, Netflix expects to add 0.75 million new members in the United States.

In contrast, Netflix had added only 0.4 million members in the third quarter last year due to “un-grandfathering” as a result of an increase in pricing that Netflix announced last year.

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What drove the higher-than-expected net additions in 2Q17?

According to Netflix, the higher-than-expected subscriber additions were largely driven by the company’s content. Most of the new seasons of its popular shows, including House of Cards, and new shows premiered in the second quarter of this year.

As Netflix breaches the 50 million member mark in the United States, it remains optimistic about its streaming service. The company acknowledged in its fiscal 2Q17 earnings call that, while Alphabet’s (GOOG) YouTube is clocking a viewership of 1 billion hours each day, Netflix is clocking a billion hours of viewership each week with its content.

Netflix also noted that, even in the face of rising competition from other streaming services like Hulu, it believes there’s still room in the market for Netflix’s viewership to grow.


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