Netflix raised prices and still signed up more subscribers than ever before

Some doors can’t be closed.
Some doors can’t be closed.
Image: Courtesy Netflix
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Netflix ended the biggest year in its history with the best quarter in its history.

The global streaming giant added 8.3 million new subscribers during the fourth quarter of 2017—a new record for quarterly subscriber growth that blew passed analysts’ expectations—it said in a forecast released today (Jan. 22, pdf). That’s an 18% boost from the same period a year earlier.

The growth was especially impressive for occurring in a period when Netflix announced price hikes in its largest market, the US. The company said in October that it would raise the cost of two of its three US packages, including the popular “standard” plan. In the past, price increases have spooked subscribers. This time, however, it didn’t turn off new patrons, and made those already on the service more valuable to Netflix. Nearly 2 million of the fourth-quarter additions were from the US—more than analysts expected—and the other 6.36 million were from overseas.

Over the full 2017 year, Netflix added 24 million subscribers, bringing its membership base to roughly 118 million. That’s thanks in part to the growth of Netflix’s international streaming business, which makes up the bulk of its subscriber base.

The segment is starting to pull its own weight, profit-wise. International subscribers added $135 million in “contribution profit,” which measures revenue minus the cost of content and marketing expenses. That compares very favorably to the $67 million in losses for the segment this time last year.

Shares closed up about 3% on Monday in anticipation of a strong earnings report, and soared more than 9% to $248.50 at the time of this writing. Netflix’s total return in 2018 is up 18% so far, surpassing the year-to-date growth rate of the other “FANG” stocks—the acronym for the four high-performing technology stocks, Facebook, Amazon, Netflix, and Alphabet (formerly, Google).

In addition, Netflix posted $3.3 billion in revenue in Q4 2017, and $11.7 billion for 2017, 27% and 33% more, respectively, from a year ago. Earnings more than doubled to $0.41 per share in the fourth quarter of 2017, compared $0.15 in the same quarter of 2016.

Profitability is important as the company takes on more debt and burns through cash to finance its programming. Streaming content obligations—the amount it is estimated to owe for content based on current contracts—rose to $17.7 billion in the fourth quarter, on top of Netflix’s $6.5 billion in long-term debt.

The company has long maintained that stellar originals are what sets its platform apart from rivals like Amazon and Hulu, and other video competitors like Facebook, YouTube, and soon Disney. In the fourth quarter of 2017, popular Netflix shows like The Crown, Stranger Things, and Black Mirror returned with new seasons. The platform also launched new series like Godless and Mindhunter, and released its first first blockbuster movie, Bright.

Netflix expects to spend $7.5 billion to $8 billion on content in 2018, up from around $6 billion last year, and $2 billion on marketing, the company said in its forecast. It also plans to spend another $1.3 billion on technology and development during the year.