Netflix added 8.8m paying subscribers in the last three months of 2018

Netflix added 8.8m new paying subscribers in the last three months of 2018, comfortably beating its own estimate of 7.6m new subscribers, and taking its total number of subscribers globally to 139m.

Of the 8.8m new subscribers, 7.3m came from outside the US. Over the course of 2018, Netflix added 29m new paid subs, compared to 22m in 2017. The company said it expects to add another 8.9m new paid subs in the first quarter of 2019.

Revenues for the quarter were up 28 per cent year-on-year at $4.2bn (£3.2bn). Total revenue for 2018 came in at $16bn, 35 per cent up on the previous year.

The results were announced two days after Netflix revealed plans to raise the price of a monthly subscription for US consumer by $1-$2 per month, depending on the plan they are on.

In a letter to shareholder, the company says its multi-year plan is to keep significantly growing its content while increasing its revenue faster to expand its operating margins. It also said that “as a result of our success with original content, were becoming less focused on 2nd run programming.”

The letter went on to say that in the US, Netflix earns around 10 per cent of television screen time and that when it comes to competition, Netflix competes with (and loses to) Fortnite more than HBO. The letter also notes that when YouTube went down globally for a few minutes in October, Netflix’s viewing and signups spiked for that time.

Netflix’s own current content hits include the Bird Box, starring Sandra Bullock, which the company estimates will be seen in over 80m member households in its first four weeks; You (40m households in the first four weeks); and Sex Education (also 40m households in the first four weeks).

Commenting on the results, MediaCom UK CEO Josh Krichefski said that, despite impressive subscriber numbers, Netflix has some serious questions to ponder about its business model. He said:

“Netflix’s growing catalogue of exclusive shows and ongoing push to create original content is clearly reaping rewards; recent hits such as Bird Box and Haunting of Hill House are generating the same buzz as Oscar-winning films. This is all well and good but it does beg the question of how much longer Netflix can sustain itself without an advertising model, with the likes of Prime Video and NowTV making up ground quickly. While Netflix currently leads the way in streaming platforms, investing millions and millions into its own content may not be enough to enjoy unbridled success in the future.

“As streaming platforms continue to prove popular – together with the mass adoption of smart TVs – the door is open for brands and advertisers to join the conversation too. With the opportunity to deliver targeted ads on connected TVs, the likes of Amazon’s Fire Stick and Google’s Chromecast can seize the opportunity to deliver content in a smart, programmatically-driven way. It will be interesting to see how Netflix responds to a future of smart, digital TV advertising and whether it will be forced into an ad-based model to sate the increasing consumer demand for exclusive and engaging content.”