Netflix smashes forecasts on member and revenue growth

Arvind Hickman
By Arvind Hickman | 19 January 2017

Netflix's expansion into new markets has exceeded expectations and helped it grow global membership by 25% to 93.8 million in the 2016 calendar year.

The SVOD giant released its final quarter results for 2016, punctuated by better than expected revenue and membership rises outside of the US.

The results show that Netflix's global expansion plans are ahead of schedule despite more rivals entering the streaming space, including the recent global roll-out of Amazon Prime Video.

Netflix grew global revenue by 35% to $8.3 billion in the 2016 calendar year. Importantly, 95% of members pay for the service, a healthy conversion rate, and the growth of paying members is identical to total members. The contributing profit was also up 74% compared to a year ago.

Netflix's growth is largely driven by international members up 48% year-on-year. They now make up 47% of Netflix's subscriber base.

In Q4, Netflix added 5.12 million international members, well above its forecast. In the first quarter of 2017, it expects to add 5.2 million members, with 71% coming from outside of the US.

Although Netflix doesn't split its figures by country, Roy Morgan recently placed Netflix's reach in Australia at 5.7 million people through 2.2 million household subscriptions.

Netflix acknowledged that internet streaming is becoming an increasingly cluttered market with the likes of Apple TV, Amazon Prime Video and traditional satellite and linear TV broadcasters moving into the space. 

“This quarter marks the 10-year anniversary of our launch of streaming," Netflix said in a statement. "The next decade will be even more amazing and tumultuous as internet TV supplants linear TV, and as we strive to remain a leader.

“Since our global expansion is proceeding well, we intend to grow our global operating margin for many years ahead. We’ve been around a 4% annual operating margin for the past two years, and we are targeting about 7% for the full year 2017 based on current foreign exchange rates.”

A concern the streaming media company highlighted was the threat of the US government weakening net neutrality laws, which would place more power in the hands of distributors to control data access and cost, potentially favouring content partners and penalising rivals.

“No one wants ISPs to decide what new and potentially disruptive services can operate over their networks, or to favour one service over another," Netflix adds. "We hope the new US administration and congress will recognise that keeping the network neutral drives job growth and innovation"

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