Customer Behaviour

Netflix ended 2018 with more than 139 million paid subscribers, adding 8.8 million members in the three months to 31 December. The streaming giant said the growth reflected the success of its original programmes, such as Bird Box and Roma.

Netflix-original material now represents the “vast majority” of its most popular shows, executives said. Television viewers in the US also spend an estimated 10% of their time on Netflix, they claimed. The figures accompanied the release of the firm’s quarterly earnings report on Thursday.

They offered investors a rare glimpse of audience viewing patterns, as the firm seeks to explain how its massive spending on content – much of it funded with debt – is paying off.

Analysts estimate that Netflix spent more than $13bn on movies and shows this year. Netflix said its spending is likely to increase.

“Our multi-year plan is to keep significantly growing our content while increasing our revenue faster to expand our operating margins,” Netflix said in a shareholder letter tied to the earnings report.

“Our growth is based on how good our experience is,” it said.

Shares, which had risen sharply in recent weeks, dipped more than 3% in after-hours trade, after revenue for the fourth quarter fell shy of analyst expectations.

The firm reported quarterly revenue of $4.2bn (£3.2bn), up 27% from the same period in 2017.

However, a price increase in the US and some countries in Latin America and the Caribbean announced this week has the potential to add some $1bn in revenue.

The firm said it will also look to adjust prices elsewhere as currencies fluctuate, but warned the increases could lag behind the exchange rate shifts, causing revenue hiccoughs.

George Salmon, analyst at Hargreaves Lansdown, said he expected Netflix subscribers to swallow the higher fees.

The 8.8 million rise in paid subscribers – most of them from overseas – marked 6% growth from the prior quarter.

He added: “The worry, of course, is that international bruisers like Disney and Amazon aren’t going to go down without a fight, and both have the financial clout to counterpunch pretty hard. The battle for viewers’ eyeballs is only just getting started.”

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