The streaming video giant has a shot at extending that momentum into the start of the new year -- but only if CEO Reed Hastings and his team can meet their subscriber targets when Netflix posts earnings results in late January.
Investors will also be keeping tabs on the major content launches scheduled for the weeks ahead, since those releases mean Netflix can expand its membership base even as monthly prices inch higher.
January 22: Quarterly report release
Earnings day tends to generate volatility in Netflix's stock, and that's especially true for the streamer's fourth-quarter report that, this year, is slated for a Jan. 22 release. A year ago, the company raced past expectations and added 7 million new users, compared to management's prediction of 5.2 million. That result made Netflix's fiscal 2016 its third straight year of accelerating user growth.
Executives are predicting another strong outing for the holiday period that just closed. Total membership gains should reach 6.3 million, according to their forecast, with most of the growth coming from international markets. If it hits that guidance, Netflix will have added 22 million members in 2017, up from 19 million the prior year. Essentially all of that accelerating growth can be pinned on international markets, too, since domestic gains are holding steady at just below 5 million per year.
Hastings and his team will also issue an updated profit plan, since they're likely to hit their goal of 7% annual operating margin in 2017. They have promised investors a steadily increasing margin from there, but on Jan. 22, we'll see that forecast backed up with hard numbers as Netflix looks ahead to 2018.
January 12: Original movie launches
Netflix is likely to spend between $7 billion and $8 billion on acquiring fresh content in 2018, which means new shows and movies should be hitting its servers at an almost daily pace. An increasing proportion of that spending will be dedicated to original and exclusive entertainment like The Polka King, set to launch on Jan. 12. The film stars Jack Black and Jason Schwatzman and, like December's release of the movie Bright, will be distributed across all of Netflix's global territories.
These original products are expensive, risky, and they require an upfront cash investment that's not necessary when Netflix just licenses content from other owners. The potential payoff is huge, though, in terms of generous distribution rights and the added membership draw that comes with having a deep portfolio of exclusive content. That's why Netflix has so far been happy to go deep into debt to fund more aggressive moves into producing originals. This bucket started off at around 10% of all content spending before reaching 25% in 2017.
Management has given every indication that this proportion will climb closer to 50% in the coming years. "Our future largely lies in exclusive original content, Hastings told investors in October, "that drives both excitement around Netflix and enormous viewing satisfaction for our global membership and its wide variety of tastes."
That initiative makes it a certainty that the company will produce many more expensive flops. Netflix's goal is to limit those misses while still approving risky projects that, like Stranger Things did, break out as global hits. The Polka King represents just the latest outgrowth of that strategy.
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