Q3 results: with over 40 million subs, Netflix grows 25% in a year

Michelle Clancy | 22-10-2013

Netflix continues to wow Wall Street with its subscriber momentum. In its latest third-quarter results, it saw the domestic net addition of 1.3 million subscribers – 11% higher than the prior year Q3, bringing the total US base to 31.09 million subscribers.

Internationally, net additions were significantly up from the prior year at 1.4 million new members, driven by the company's expansion to the Nordics and the Netherlands. In addition, there was a surge in low-quality free trials in September in Latin America that temporarily boosted the total member number.
Together Netflix' total global base is just over 40 million, a 25% increase year-over-year.
Netflix expects Q4 net additions to be approximately equal to Q4 of the prior year.
Revenue-wise the streamer continues to show thinnish margins thanks to the amount that it spends on content acquisition, bringing in $32 million of profit on $1.106 billion revenue. In Q4 it expects to expand its contribution margin about 400 basis points year-over-year to about 23%.
"That means that sequentially our target contribution margin is slightly down Q3 to Q4," the company said in its earnings statement. "As a reminder, we shifted our contribution margin target a few months ago from '100 basis points of quarterly sequential improvement' to '400 basis points Q over prior year Q', so we are right on target with our articulated margin growth strategy. Our $7.99 price is working very well for us for both membership growth and contribution margin growth."
When it comes to its content strategy, the original series get most of the headlines, but the company said that a bigger percentage of overall Netflix viewing is generated by its exclusive complete season-after series. During the quarter, it launched new seasons of The New Girl, The Walking Dead, Scandal, Breaking Bad, Revolution and Pretty Little Liars.
However, original content remains a top priority, it said. "Over the next few years we aspire to support creation of some of the most compelling and remarkable content ever produced. Coupled with the flexibility of our Internet viewing and power of our personal recommendations we will keep changing television for the better."
Orange is the New Black has been a tremendous success for the company and will end the year as its most watched original series ever and, "as with each of our other previously launched originals, enjoys an audience comparable with successful shows on cable and broadcast TV. We have seen sustained social media buzz in the months after its debut and it is also one of the most critically well received TV shows of 2013," it added.
In addition to Orange is the New Black, during Q3 Netflix launched the new Ricky Gervais series Derek and broadened its original content offering with the acquisition of stand-up comedy specials from Russell Peters and Aziz Ansari, premiering exclusively on Netflix in October and November, respectively. It also rolled out a second set of episodes of Mako Mermaids, our original series directed at the teen audience, and will soon expand into original documentaries, a category that does well on the Netflix service.
"This quarter we will premiere our inaugural second season of a Netflix original series with the return of Lilyhammer starring Steven Van Zandt," the company said. "We will also be launching our first animated original series with Dreamworks Animation, Turbo F.A.S.T."