'Stranger Things,' 'The Crown' Propel Netflix Membership Gains

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Reed Hastings

The streamer now has more than 117 million members worldwide.

Stranger Things and The Crown led Netflix to a strong end of the year in which the streamer added more new subscribers than it has in any previous quarter. 

Netflix reported Monday that during the fourth quarter it grew revenue by nearly 33 percent to $3.29 billion. Diluted earnings were 41 cents per share, both in line with Wall Street's expectations. 

Meanwhile, the streamer continued to add new subscribers. It added 8.33 million new members during the period, including 1.98 million additions in the U.S. and 6.36 million additions internationally. That represents membership growth of 25 percent year over year. Analysts were anticipating that Netflix would grow its subscriber base by 1.29 million in the U.S. and 5.05 million internationally. All told, the company now has more than 117 million total members worldwide and more than 110 million paid members. 

The gains — which GBH analyst Daniel Ives called "eye-popping" — came despite a price hike last fall that saw many subscribers' monthly memberships increase by $1. 

Notably, the fourth quarter is when Netflix released some of its biggest franchises, including the second seasons of dramas Stranger Things and The Crown, a new installment of anthology series Black Mirror and the premiere seasons of Mindhunter and Godless. Meanwhile, the streamer released the Will Smith film Bright, which it said was one of the most-viewed original titles on the platform, despite having only a 27 percent rating on Rotten Tomatoes. 

Asked about the disparity between the critical reception and consumer response to Bright during a call with investors, Netflix CEO Reed Hastings said "critics can be pretty disconnected from the mass appeal." 

The streamer also recorded a $39 million charge "for unreleased content we've decided not to move forward with." Netflix didn't elaborate on the source of the charge, but it comes after the company cut ties with House of Cards star Kevin Spacey following sexual assault allegations. Netflix also scrapped a planned Gore Vidal biopic starring Spacey.

For the first quarter of 2018, Netflix is forecasting that it will add 6.35 million subscribers, 1.45 million in the U.S. and 4.9 million internationally.

The streamer also forecasts that it will spend between $7.5 billion and $8 billion on content this year and will grow its marketing spend from $1.3 billion annually to $2 billion. "We want great content, and we want the budget to make the hits we have really big, to drive our membership growth," reads a statement in the company's fourth-quarter shareholder letter. Technology and development spend will grow to $1.3 billion this year. 

As Netflix ramps up its spending, it expects to burn between $3 billion and $4 billion in cash in 2018. "We're growing faster than we expected," the company explained. 

Netflix continues to remain bullish about its opportunity to withstand competition in the streaming landscape. "The market for entertainment time is vast and can support many successful services," the shareholder letter notes. "We believe this is largely why both we and Hulu have been able to succeed and grow." The company name-checked Amazon ("likely to bring in a strong new leader"), Disney's forthcoming service ("a beloved brand and great franchises") and Facebook and YouTube ("free ad-supported internet video is a big force in the market for entertainment time, as well as a great advertising vehicle for Netflix"). 

Hastings expanded on the subject during the call with investors, explaining that he doesn't see Disney's forthcoming streaming service as any more of a threat than Hulu is to Netflix. "We'll all learn from each other and total streaming will grow faster because of the competition," he added. 

The exec also reiterated that Netflix does not plan on featuring advertising on its platform anytime soon. "It is a core differentiator," he said of the streamer's subscription-only model. "We're having great success on the commercial-free path."

Another announcement that Netflix made on Monday was that it will add Rodolphe Belmer, the former CEO of Canal+ in France, to its board of directors. 

Netflix shares closed the day up more than 3 percent, or $7.12, to $227.58. Shares were trading up more than 8 percent on the strong quarter, pushing its market cap above $100 billion for the first time. 

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