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Netflix Adds 3.57M Subscribers in 3Q - Broadcasting & Cable

Netflix Adds 3.57M Subscribers in 3Q

Earnings exceed Wall Street expectations and stock jumps
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Netflix said it added 3.57 million subscribers worldwide in the third quarter, including an additional 37,000 in the U.S.

The net additional were bigger than expected worldwide, but less than forecast in the U.S. by Wall Street.

For the fourth quarter, Netflix is forecasting gains of 5.2 million subscribers worldwide including 1.45 million adds in the U.S. That would be a smaller increase than a  year ago, though significantly larger than the third-quarter gain.

From a financial perspective, net income rose to $52 million, or 12 cents a share, from $29 million or 7 cents a share a year ago, exceeding analysts’ forecasts.

Revenue was $2.2 billion, up from $1.6 billion a year ago, topping the $2 billion mark for the first time.

Netflix stock jumped in after-hours trading, increasing nearly 20% to more than $119 a share. During regular trading, the stock was down 1.65% to 1.67%.

"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 Internet allows us to reach audiences all over the world and, with a growing base of over 86 million members, there’s a large appetite for entertainment and a diversity of tastes to satisfy,” the company said in its letter to shareholders.

“ We are fortunate that our Internet-centric, on-demand, subscription-only business model allows us to support programs for both mass and niche audiences alike. Our personalization algorithms help us promote the right content to the right viewers. And since we are not shelf-space constrained nor reliant on advertising, we have the luxury to tell all kinds of stories in less traditional ways. The growth of Internet TV globally has ushered in a new golden age of content, with consumers everywhere enjoying unprecedented access to amazing amounts of high quality programming,” the company said.

Netflix said it woudl contienue ot ramp up spending on content, moving into the unscripted area. The company planned to spend $6 billion on content in 2016 and that would increase as the company began creating original content in more markets and creating more of its own shows, rather than acquiring programming.

During the company's earnings call, chief content officer Ted Sarandos said that the company saw financial and strategic benfits to creating its own content, although the initial cash costs were higher. He said that spending on acquired content would continue to increase, though it would represent a shrinking part of overall content spending.

The increases spending will increase the companies negoative cash flow this year to about $1.5 billion. The company plans to borrow more to cover those costs. But despite the increased spending on content, the company expected earnings to grow and become "material" in size next year.

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