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Why Netflix Is Eyeing International Markets for Subscribers

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Netflix’s international subscriber additions

Streaming giant Netflix (NFLX) added ~7.31 million paid streaming members in the international markets in the fourth quarter. The company’s international streaming membership additions exceeded the company’s estimate of 6.1 million members. For the first quarter of 2019, Netflix expects to add 7.3 million paid subscribers internationally.

Globally, the streaming giant added 8.84 million subscribers in the fourth quarter, reaching a total paid subscriber base of 139.3 million.

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International streaming growth

In an earnings letter to shareholders, the company stated that the international subscriber additions of 7.31 million were ~41.7% higher from the year-ago quarter and 44.2% higher than the preceding quarter. Netflix’s international streaming revenue soared ~35.9% year-over-year to $2.1 billion in the fourth quarter, and it expects its revenue to rise 31.9% YoY to $2.35 billion for the first quarter of 2019.

Netflix’s international streaming paid memberships were 80.77 million in the fourth quarter, higher from the company’s expectations for paid subscriptions of 79.56 million. It was also up from 57.83 million paid subscribers in the year-ago quarter and 73.46 million paid subscribers in the third quarter. For the first quarter of 2019, the company expects international paid subscriptions to reach 88.07 million.

Excluding the foreign exchange impact, international average selling price (or ASP) rose 6% YoY and 1% sequentially in the fourth quarter.

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Netflix posted a contribution margin of 3.9% in the international segment in the quarter, higher than the 2.5% margin in the year-ago quarter. However, it was much lower than the 11% margin in the preceding quarter, as was anticipated by the company during the third quarter, due to massive investments in original content and marketing in Q4 2018. For the first quarter, the company foresees a contribution margin of 9.8%.

Focus on international markets for subscribers

Notably, the company is gaining more revenues on the international front than the domestic market. The company expects to ride on its international members to grow its overall subscriber base, as the company is struggling to add US subscribers from the past few quarters.

Among several of its international projects, Netflix’s Spanish original Elite gained huge popularity worldwide in the first four weeks. Italy’s original series Bodyguard and Protector, an original series from Turkey, also became a hit in the first four weeks of their release. Netflix continues to expect to expand in the international markets including India (INDA), Mexico, Spain, Italy, Germany, Brazil (EWZ), France, Turkey, and throughout the Middle East.

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