Netflix reported a 'drama'tic subscriber growth. Adding almost 7 million viewers in its third quarter, the online video streaming giant beat estimates of around 5 million. That makes its number of worldwide subscribers more than 137 million.
This could potentially turn the tide for the company, after it fell short of expectations in user growth in the preceding quarter. Netflix hopes to add another 9.4 million subscribers in the last part of this year.
On Tuesday, CEO Reed Hastings attributed the discrepancy between the company's subscriber estimates and its actual figures to a "forecasting" issue. He said that going forward, the company will focus on paid subscribers — versus the existing calculation that includes people who are using free trials. Minus those on free trials, Netflix has about 130 million paid subscriptions. Nevertheless, Netflix's third-quarter earnings per share (EPS) beat estimates, at 89 cents versus the 68 cents forecast by analysts.
The company's growth/marketing strategies for the international market seems to be paying off big time. At a conference last February, chief financial officer David Wells said the company would have about 80 foreign-language productions in 2018. Gaining an additional 6 million of new international subscribers in the latest quarter, Netflix said the figure exceeded its initial prediction.
A key area the company is focusing on for its global audience is content production, thereby potentially heating up competition with media giants Disney and AT&T's WarnerMedia, (who are working on developing their own online streaming segments) and with entrenched players in the space such as Amazon’s Prime and Alphabet's YouTube. Slated to spend about $8 billion on programming in 2018, Netflix said it is expecting negative free cash flow of $3 billion this year, and has similar expectations for next year. (Free cash flow is the cash that remains after a company has covered its costs and capital expenses).
In addition to its growth and success in original programming, Netflix also sees viable opportunities in licensing content from other companies. "We've been a pretty dependable buyer," Chief Content Officer Ted Sarandos said. He indicated that other studios might earn healthy returns by selling some of their content to Netflix.