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Three things to look for when Netflix reports earnings today

January 22, 2014
January 22, 2014

It’s all about subscribers

Wall Street will be more interested in how many paying subscribers Netflix added during the quarter, and how many it expects to add next year, than the company’s profits and revenues. Last quarter, Netflix officially surpassed HBO  in the number of paying subscribers, but the bigger it gets, the harder it is to keep growing. Goldman Sachs expects there was a gain of about 2.2 million subscribers in Q4, which would be within the company’s forecast of 1.6 million to 2.4 million, and would push its paying subscriber base above a whopping 33 million. Netflix is expected to forecast that it will add a further 1.7 million customers in Q1 2014, according to analysts surveyed by Bloomberg.

International expansion

Rumors surfaced earlier this month that Netflix could be on the brink of further expansion on the other side of the Atlantic Ocean. In Europe, Netflix is already live in the UK, the Netherlands and the Nordic countries. But after a recent job posting said French and German skills would be desirable, speculation has intensified that it was poised to enter western Europe’s two biggest economies. That follows recent reports the company met with advisers to French president François Hollande, no less, to discuss a Gallic launch. According to the company, the factors determining which countries it goes into include broadband infrastructure, content availability, and costs. Germany and France score highly on infrastructure, according to the OECD.

New pricing plans?

Netflix has been testing ways to extract more money from its US users, some of whom free-ride on friends or relatives’ subscriptions. The most recent reports suggested this could come in the form of cheaper packages that could be used only on a single device. To be fair, rumors about Netflix clamping down on freeloaders were in the air for most of last year, and nothing transpired. But Netflix’s need to generate more revenue could become much more apparent if a recent ruling by US lawmakers enables broadband providers to charge the company—which accounts for up to one-third of the US’s data traffic—directly for the amount of data it consumes.

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