Joining a prestigious club of companies having a market capitalisation of $100 billion or more. Netflix, established in 1997, reached a market capitalisation of $108.31 billion on Monday surpassing Goldman Sachs that enjoys a market capitalisation of $98.11 billion. American multinational finance company was established in 1869. Netflix Inc snagged 2 million more subscribers than Wall Street expected in the final three months of 2017, tripling profits at the online video service that is burning money on new programming to dominate internet television around the world. In 2017, Netflix recorded its first full-year profit in international markets. The company has said it is aiming for steady improvements in profitability overseas this year. “We believe our big investments in content are paying off,” Netflix said in a quarterly letter to shareholders. Netflix is raising its marketing budget faster than revenue is growing and will spend about $2 billion this year.
Here are the key reasons behind this stellar rise of Netflix:
1) The company has signed up more than half of all US broadband households and is building its customer base in 190 countries by spending billions on programming. Netflix picked up 6.36 million subscribers in international markets from October through December, when it released new seasons of critically acclaimed shows “Stranger Things” and “The Crown” as well as Will Smith action movie “Bright.”
2)Along with 1.98 million customer additions in the United States, the company ended the year with 117.58 million streaming subscribers around the globe, despite a price hike in October. “Netflix is pouring more and more money into making content, and it is directly translating into more subscribers,” BTIG analyst Richard Greenfield said.The company also said it took a $39 million non-cash charge for “unreleased content we’ve decided not to move forward with.”
3) Netflix plans to spend up to $8 billion this year on TV shows and movies to fend off Disney, Amazon.com Inc, studios-owned Hulu and local competitors that are jumping into online video, and it is turning more and more to high-budget projects, such as the roughly $90 million “Bright.”
Last October, Netflix raised prices for two of its three main subscription plans to help fund the substantial content investment. The earnings report showed customers took it in stride. “Consumers are tolerant as long as something’s improving,” Netflix CEO Reed Hastings, on a post-earnings webcast, said of the price increase.
With inputs from Reuters