Netflix’s subscriber additions in 1Q18
Netflix (NFLX) has posted sluggish growth in subscriber additions in the United States for the last several quarters. The company added ~7.4 million subscribers in 1Q18, out of which ~5.5 million were international subscribers.
Netflix’s 1Q18 subscriber additions of 1.96 million in the US declined sequentially from 1.98 million additions in 4Q17. However, it topped Wall Street expectations of 1.48 million subscriber additions and the company’s forecast of 1.45 million additions, which is a positive sign for investors.
Netflix’s streaming membership growth in the US
In 1Q18, Netflix (NFLX) had domestic streaming paid memberships of ~55.1 million and ~56.7 million total memberships. Its subscription rate increase announced in 4Q17 led to 12.0% ASP (average selling price) growth in the domestic segment.
Despite the rate hike, Netflix reported domestic streaming revenues of $1.8 billion and a contribution margin of 38.3%. Netflix has been posting a declining contribution margin, possibly due to the company’s increased focus on international growth and intense competition from other streaming giants Amazon (AMZN), Alphabet’s (GOOGL) YouTube, Hulu, and Time Warner’s (TWX) HBO. However, Netflix’s domestic margin bounced back to 38.3% in 1Q18 from margins of 34.4% in 4Q17 and 41.2% in 1Q17.
Netflix expects a contribution of 39.6% in 2Q18, as the company focuses on growing its subscriber base. An analyst from GBH believes that Netflix could penetrate the US and international markets in 2018 as it delivers original content to its subscribers.