Our growing appetite for binge watching cannot be stopped — even by price hikes from Netflix.
The streaming media giant reported far more new subscribers than analysts expected. The company said that 8.5 million people signed up for its service over the past three months, blowing past its expectation of 6.3 million subscribers.
Shares spiked as much as 16 percent in after-hours trading, sending Netflix's value over $100 billion for the first time. The stock had closed Monday at an all-time high of $227.58.
Many feared that Netflix would see fewer new sign-ups in light of the company's decision to raise its prices last year in response to ballooning costs for licensed and original shows.
But its fourth-quarter earnings, which are the first to give us a good sense of how people responded to the increase, show those fears are unfounded. At least for now. Netflix managed to lure people to see premieres of original favorites including “Stranger Things” and “The Crown.” Even in the United States, where the company already had 51 million subscribers, it managed to add an additional 2 million.
The company also reported it lost $39 million in production costs due to movie star Kevin Spacey's sexual harassment scandal, which disrupted work on "House of Cards" and a Gore Vidal biopic, according to the Financial Times. Netflix did not directly link this loss to Spacey, but chief financial officer David Wells said on the company's earnings call that the loss was "related to the societal reset around sexual harassment."
Despite that setback, made Netflix $3.29 billion in revenue, just ahead of analyst estimates for $3.28 billion.
Yet while Netflix may have reason to celebrate, a big shadow still looms over its earnings — a shadow with mouse ears.
Entertainment juggernaut Disney announced last year that it would pull all of its content from Netflix in 2019. It then followed that punch with the news that Disney will acquire key assets from its rival 21st Century Fox. Disney — which now has not only Mickey Mouse but also Star Wars, Marvel and other beloved core franchises to its name — has made streaming video a primary focus as Hollywood masses to meet Silicon Valley’s moves into the entertainment world.
Netflix chief executive Reed Hastings downplayed any effect Disney might have on Netflix in a letter to shareholders. “The market for entertainment time is vast and can support many successful services,” he said. “In addition, entertainment services are often complementary given their unique content offerings. We believe this is largely why both we and Hulu have been able to succeed and grow.”
And other tech companies, of course, are continuing to push ahead with their own plans for original content. Amazon.com continues to put out original films and shows of its own. Apple recently purchased land in Culver City, Calif., which the Los Angeles Times reported is a way for the Cupertino, Calif., company to plant its flag near Hollywood.
(Amazon chief executive Jeffrey P. Bezos is the owner of The Washington Post.)
To answer, Netflix is planning to spend $7.5 billion to $8 billion on content in 2018, the company said, as well as $1.3 billion on technology and development. The company said last month that its subscribers watched more than 140 million hours of video a day.