RISING HIGH

Netflix has more than 100 million subscribers—and it’s burning a lot of cash to keep hold of them

Obsession
Glass
Obsession
Glass

Netflix is reaping the rewards of its lavish spending on content. The streaming-video service just crossed a major threshold as it reached 104 million subscribers during the second quarter of 2017.

CEO Reed Hastings first announced Netflix’s 100-million-member milestone in April, days after Netflix’s last earnings announcement.

The earlier achievement came during a relatively weak period for the streaming service, which usually sees subscriber growth slow during the second quarter. But this time, Netflix added 5.2 million members worldwide, outpacing the 3.2 million it had predicted.

The majority of those additions—4.1 million—came from abroad, where Netflix recorded more total subscribers than in the US for the first time. The other 1.1 million came from the company’s domestic market.

The overall growth was buoyed by a strong slate of buzzed-about new releases, including 13 Reasons Why, Glow, and Okja, and the latest seasons of Masters of None, Orange Is the New Black, Unbreakable Kimmy Schmidt, and House of Cards.

The stellar lineup has come at cost, however. Netflix has been burning through cash to pay for its programming, and expects to do so for the foreseeable future.

“With our content strategy paying off in strong member, revenue and profit growth, we think it’s wise to continue to invest,” Netflix said in its earnings release (pdf) today. “In continued success, we will deploy increased capital in content, particularly in owned originals, and, as we have said before, we expect to be [free cash flow] negative for many years.”

The company had negative free cash flow of $608 million during the second quarter of 2017, putting it further in the red than the $472 million negative free cash flow forecast by analysts, according to FactSet data.

And Netflix’s content spending obligations—its commitments for licensed and produced programming over several years—have continued to mount.

But the company’s stock didn’t seemed to notice. Netflix’s shares were trading up around 11% at $178.85 after the closing bell, and at the time of this writing.

It helped that revenue rose 32% to $2.8 billion during the quarter, and that earnings rose to 15 cents per share, up from 9 cents per share a year earlier.

home our picks popular latest obsessions search