Dive Brief:
- Netflix saw its stock price rise 20% after posting subscriber growth and sales numbers in Q3 that exceeded analysts’ forecasts as reported by CNBC.
- Its quarterly sales passed $2 billion for the first time and earnings-per-share of $0.12 compared to $0.07 year-over-year with revenue of $2.29 billion. Netflix gained a total of 3.57 million new subscribers worldwide in the quarter, besting expectation for 2.3 million new users.
- Part of solid results stems from Netflix’s original content strategy including new shows like “Stranger Things” and “Narcos” as well as stalwarts like “Orange is the New Black” and others.
Dive Insight:
The Q3 report looks to be a vindication for the original content strategy undertaken by the streaming video service. Its Q2 report was disappointing for investors. Even while Netflix goes through a monthly churn of movies and TV shows available via the service, it has been putting significant resources into original content to help differentiate the service from competition like Amazon Prime video and Hulu.
"We are now in the fourth year of our original content strategy and are pleased with our progress. In 2017, we intend to release over 1,000 hours of premium original programming, up from over 600 hours this year," the company said in a letter to shareholders.
Given the dramatic increase in subscribers, it’s clear that streaming video for TV is still a viable business model with room to grow. Barton Crockett, senior research analyst at FBR Capital Markets, did warn CNBC's "Closing Bell" that overall Netflix’s growth is slowing as it becomes a more mature company and that investors should “be careful with this stock.”
For marketers, the success of Netflix and other streaming services is one more indicator that people are willing to watch video content away from linear TV, something that might should factor into advertising strategies.
