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Netflix Expects Strong US Subscriber Growth in 4Q17

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Jan. 19 2018, Published 11:58 a.m. ET

Outlook for 4Q17 net subscriber additions

Video streaming giant Netflix (NFLX) continues to maintain strong domestic subscriber growth, which it attributes to its huge content portfolio and reasonable pricing. In 3Q17, the company gained ~850,000 subscribers, a 130% increase YoY (year-over-year), mainly attributable to lower customer additions in 3Q16, hurt by the rate increase.

In the graph above, we can see the net subscriber growth for Netflix for the last five quarters. During that period, it gained customers at a CAGR (compound annual growth rate) of 23.7%. In the same period, it witnessed average quarterly net customer additions of 1.1 million.

In the last three quarters, the company added on a consistent basis more than a million customers every quarter. In 4Q17, it expects to gain 1.3 million customers against 1.9 million added in 4Q16.

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Fiscal 2017 total subscriber guidance

At the end of 3Q17, Netflix’s total membership in the United States stood at 56.5 million against 39.3 million in the prior year’s quarter. The company expects to end fiscal 2017 with 61.5 million domestic users, which is an increase of 39% YoY. This strong membership growth could indicate that the company’s domestic business remains strong despite the hike in US rates.

In October 2017, Netflix raised its price for the mid-tier and high-end customer segments by $1 and $2, respectively. However, rates for entry-level customers remained the same at $7.99 per month.

OTT (over-the-top) services for DirecTV Now (T) and DISH Network’s Sling TV (DISH) start at $35 and $20, respectively.

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