Netflix revealed its fourth quarter earnings today, capping off a banner year that saw the streaming service surpass HBO in subscriber count and earn critical acclaim for its original programming. In Q4, the company handily beat Wall Street expectations with revenue of $1.18 billion and earnings per share of $0.79. During the same period last year (before viewers had streamed a single episode of House of Cards), Netflix earned 13 cents per share on revenue of $945 million. Ahead of today's official earnings, Wall Street estimates had landed on $1.16 billion in revenue and earnings per share of $0.65.
Netflix ends the year with over 44 million customers worldwide
But investors (and Netflix's competitors) are far more interested in a different number: the company's subscriber growth. Netflix added 2.33 million new domestic subscribers in Q4, bringing its total US subscriber base to 33.42 million. Factoring in international markets, that number swells even higher to over 44 million. The company's original forecast called for 1.6 million to 2.4 million new customers for the quarter. Clearly there's still room for growth, and Netflix's impressive programming lineup continues to reel in new subscribers. Still, some analysts are concerned that Netflix — now bigger than HBO — may be nearing the saturation point for home streaming. To keep current trends moving, Netflix says it's experimenting with various price points and hopes to "offer new members a selection of three simple options to fit everyone’s taste."
Reed Hastings fires a warning shot at internet providers
Another potential concern is a recent federal court ruling that struck down the FCC's net neutrality rules. That unfortunate decision thrusts Netflix into an awkward spot. The company's streaming video commands a huge percentage of internet bandwidth each and every day, and the landmark ruling effectively gives ISPs the option of charging Netflix for using their infrastructure. There's been no indication that Comcast, Time Warner Cable, or other internet providers plan to take that radical step, but Netflix isn't waiting to see their move. In his letter to shareholders, CEO Reed Hastings writes, "we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver" if ISPs began levying extra charges on Netflix — a scenario it slams as "draconian."
But Netflix doesn't seem phased by the "what ifs." The company immediately positioned itself as the leader in 4K at CES earlier this month; ultra high-def streaming will be offered on a number of TVs scheduled to ship this year. Netflix is also continuing to bolster its successful and award-winning original programing lineup. House of Cards will return for its second season in February, and Lillyhammer — the show that started Netflix's foray into original content — is coming back for a third season later this year. Turbo Fast, the animated kids series produced in tandem with DreamWorks, is on track "to become one of the most popular kids series ever on Netflix," Hastings says.
Perhaps the biggest question facing Netflix is where the streaming service is headed next. We should hear more on that as the year progresses, according to the shareholder letter. "We plan later this year to embark on a substantial European expansion," it reads. "Our success this year in international net additions and shrinking contribution losses confirms our belief that there is a big international opportunity for Netflix."