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Netflix, Inc.: 2 Ambitious Goals and 1 Big "Maybe" for 2016

By Daniel Sparks – Feb 1, 2016 at 2:20PM

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Understanding Netflix vision for a year marked with heightened competition.

After wrapping up a huge 2015, some investors may be wondering whether or not Netflix (NFLX -0.69%) can continue to impress investors. Looking ahead, here are some of management's goals for the year, along with one aspiration, that Netflix may need to make progress on to live up to the market's high expectations.

Image source: Netflix.

Goal No. 1: 600 hours of original programming 
This impressive goal for original content is indicative of management's belief that high-quality content is imperative to the company's success. Indeed, 600 hours represents 33% year-over-year growth from the 450 hours of original content it produced in 2015.

Even more, this year's rollout of more Netflix originals will bring the company into new territory as far as types of content, management explained in its fourth-quarter shareholder letter:

Beyond the sheer volume of content, the breadth of our original programming will continue to expand with current plans for new seasons of 30 or so original series (including The Crown and The Get Down), eight original feature films, 35 new seasons of original series for kids, a dozen documentaries, and nine stand up comedy specials.

But this aggressive roadmap for originals will come at a cost. Management expects to burn about $1 billion in cash "and maybe a little more this year," said Netflix CFO David Wells during the company's fourth-quarter earnings call.

Image source: Netflix.

To help fund its aggressive and costly expansion of original content, the company said in its fourth-quarter shareholder letter it is "likely to raise additional debt in late 2016 or early 2017."

Goal No. 2: Record member additions in Q1
On the back of the company's aggressive global expansion in 2015, Netflix believes it can start off the year with record member additions of 6.1 million -- 1.75 million members in the U.S. and 4.35 million in international markets.

Could Netflix's higher number of global markets this year compared to last drive record member additions all year?

Notably, Netflix will be up against more significant competition in 2016 than it was in 2015. This year will mark the company's first full year of head-to-head competition with Time Warner's (TWX) HBO NOW, an online platform that gives paying users stand-alone access to HBO content -- even without a cable subscription.

HBO Now was launched in April last year and has seen enough success for the company to take the opportunity seriously.

"While it's very early and we have a lot of work ahead of us," said Time Warner CEO Jeff Bewkes during the company's third-quarter earnings call, "the early results for HBO NOW point to a significant long-term opportunity."

Maybe: Expand to China
While investors shouldn't count on this growth opportunity in 2016, it's definitely Netflix management's aspiration to expand its streaming service to China as soon as it can.

Management detailed the market in its fourth-quarter shareholder letter in terms of how it is thinking of its opportunity to bring its service to the important:

In the last remaining major market, China, we have work and uncertainty ahead. We are building relationships, understanding the market, and seeking the conditions we require to provide our service to entertainment lovers there. Our expectations are modest and long‐term. We may be able to get started this year and thus deliver on "whole world by end of 2016" or it may take longer.

But it's worth emphasizing that, while Netflix hopes it can expand to China in 2016, management also noted that most of its focus during the year will be "on the 130 countries we launched on January 6."

All three of these items -- an aggressive rollout of more original content, higher member additions, and Netflix's possible China expansion -- will be worth keeping an eye on during 2016.

Daniel Sparks has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Netflix. The Motley Fool recommends Time Warner. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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