Earnings overviews
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Will Subscriber Momentum Continue?
2010 was a great year for Netflix in terms of subscriber additions. For the whole year, the company added about 7.74 million subscribers amounting to a total 20 million at the year end, representing 63% growth over 2009. [1] If we look at trends in the last few quarters, except for some seasonal decline in Q2 additions, the subscriber additions have accelerated. Q4 2010 was the best quarter ever for Netflix, resulting in 3.08 million net additions. [1]
Will this momentum continue? There are few factors at play here. First, the company introduced a streaming-only plan at a lower price towards the end of 2010 that has led to subscriber acceleration. Apart from this, expansion in Canada has been helpful. However, there may be a slowdown in subscriber additions due to certain factors. Firstly, Netflix might face competition from Amazon (AMZN) Prime video streaming service that was launched last quarter. Secondly, given the recent subscriber surge and Netflix’s subscriber base (already approaching that of Comcast, we feel that Netflix might have moved towards the flattening part of the s-curve in terms of service adoption. In other words the rate of subscriber additions, should decelerate going forward. Some seasonality will help keep subscriber additions elevated in the coming months, but we are unlikely to see the pace of growth as Q4 2010.
Other Factors To Look For
Apart from the subscriber momentum, investors should look out as to where Netflix’s content acquisition costs are headed. Netflix’s expansion in future is likely to come at a higher cost compared to past. Also, it will be interesting to see the revenue impact of new pricing structure and whether significant number of subscribers have scaled down to streaming plans.
Last 10K filed for year ending Dec
ir.netflix.com |
