2013 was a stellar year for Netflix. The DVD rental and video-streaming service added more than 6 million paying subscribers in the US, became bigger than HBO, and was the best performing stock on the benchmark S&P 500 Index after nearly trebling in value.
Yet 2014 has been almost as eventful, and it’s only April. The company, which has been riding a wave of anger against pricey cable providers and enthusiasm for its simple, easy-to-use product for a few years now, is no longer the upstart—it’s now facing very grown-up challenges. Its earnings report, due today after markets close in the US, should set the tone for an interesting year ahead.
In the last two months Netflix has released the highly anticipated second series of its hit show, House of Cards, thrust itself into the heart of a fierce and critical debate about how the internet will be regulated for years to come, and earned a new, credible (and dangerous) competitor in the form of Amazon.
JP Morgan expects today’s earnings to show that Netflix added another 2.3 million paying subscribers in the US during the first quarter of 2014, buoyed by the House of Cards release and unusually cold weather in parts of the US that meant people stayed indoors more. That will take its US customer base to 35.7 million users. As always, that’s the number investors are likely to be fixated on. Even though its share price fell in the recent tech selloff, some still think Netflix would have to grow by an impossible amount in its home market to justify its current valuation.
But 2014 might be the year where the narrative around Netflix shifts to its activities offshore. Last quarter, the company said it was planning a “substantial European expansion,” strongly tipped to include France. Reports have also stated that the company is close to signing a lucrative distribution deal with mobile giant Vodafone that would see UK customers of the carrier get free access for a certain period.
These are the kinds of challenges that confront a $20 billion business with more than 44 million customers globally. So while his digs at HBO might be fun, Netflix CEO Reed Hastings has a lot of serious stuff to think about.