Jon Erlichman

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Netflix Inc. (NFLX.O) has reached a fresh milestone. It now has more than 150 million subscribers around the globe who pay for monthly access to the company’s streaming service. Netflix reported 157.6 million total subscribers, as of the end of its second quarter. The company also reported that 151.6 million of those are paying subscribers, while the others are free trial members.

The latest numbers highlight a business that has benefited from a largely hiccup-free streaming platform and shown an ability to launch quickly in new markets around the world.

“I think the growth is a testament to the company's ability to curate compelling content that appeals to a global audience over an increasingly enhanced user interface,” analyst Tuna Amobi of CFRA Research told BNN Bloomberg in an email. 

Shares initially fell as much as 13 per cent after hours on Wednesday, as subscriber growth in the second quarter fell well short of the company’s lofty expectations. The company cited higher subscription fees and the absence of viral hits such as “Stranger Things” and “Orange is the New Black,” which did not drop new seasons to the service until the summer. 

Netflix first launched in April of 1998, positioning itself as the world’s first online DVD rental store. While Netflix proved to be popular from the start, it took nearly three years for the company to reach 500,000 DVD-by-mail subscribers.

By the time Netflix launched its streaming service roughly a decade later in 2007, it had amassed more than 6 million subscribers.  

By comparison, the streaming decade that followed opened the door to astonishing growth. Its subscriber base reached 50 million in 2014 and climbed to 100 million members in 2017. The company now operates in more than 190 countries, catering to local language and content tastes in each market. 

“First-mover advantage is everything in tech,” Cyrus Mewawalla, head of thematic research at GlobalData, told BNN Bloomberg in an email. “By launching Netflix’s streaming service ten years ago, Netflix offered consumers the convenience and cost benefits of video streaming before anyone else.”

Number of Netflix subscribers:

Q2 2019: 157.6 million
Q2 2018: 130.1 million
Q2 2017: 103.9 million
Q2 2016: 83.2 million
Q2 2015: 65.6 million
Q2 2014: 50.1 million
Q2 2013: 37.6 million
Q2 2012: 27.6 million
Q2 2011: 25.6 million
Q2 2010: 15.0 million
Q2 2009: 10.6 million

— Jon Erlichman (@JonErlichman) July 17, 2019

The subscriber growth turned Netflix into a Hollywood juggernaut and a Wall Street darling. Since it launched its streaming business in 2007, Netflix has been the best-performing stock in the S&P 500, with a return of more than 11,000 per cent. That incredible run-up has boosted the company’s market value by more than US$150 billion.

Since reaching 100 million subscribers in April 2017, Netflix has added an additional 50 million members. In other words, Netflix has done in the past two years what initially took 14 years to achieve.

“Netflix is an amazing company led by extraordinary leaders that in only 20 years, has come from small startup to the major powerhouse in the entertainment industry,” former Netflix board member and Pure Storage CEO Charles Giancarlo told BNN Bloomberg in an email. “It has overcome challenges by all of the dominant players of their day through its focus and determination to deliver great content to customers at a reasonable price.”

To maintain the momentum, Netflix is spending billions of dollars a year on programming. 

“Netflix now invests in excess of US$15 billion per year on original content — an enormous amount,” according to GlobalData’s Cyrus Mewawalla.

Winning over new customers could prove more challenging as rivals such as The Walt Disney Co., Apple Inc., Amazon.com Inc., Comcast Corp. and WarnerMedia build out their own streaming offerings.

“Netflix could face its greatest challenge in the next few years, as competition from new entrants in the streaming landscape intensifies,” analyst Tuna Amobi told BNN Bloomberg. 

In its global battle for growth, one market that continues to elude Netflix is China, largely due to government restrictions and piracy concerns. While the company is ramping up the amount of Mandarin-language programming it offers, there are no official plans to launch in the Chinese market anytime soon.

Still, long time Netflix watcher Gene Munster of Loup Ventures estimates there’s plenty of runway for Netflix to grow. 

Munster told BNN Bloomberg in an email he estimates Netflix has the potential to reach as many as 90 million households in the United States and 500 million globally (not including China), suggesting a total addressable market worldwide of 650 million subscribers.