Netflix investors hit pause after disappointing quarter
Netflix Inc. (NFLX.O) has set the bar even higher.
The company now expects to reach 150 million subscribers by the end of this quarter. Netflix shared its outlook along with its fourth-quarter results Thursday – and it highlights what's been a remarkable ride for the world's most closely-tracked streaming service.
Netflix launched its streaming service 12 years ago. At the time, streaming was such a foreign concept that the New York Times chose to cover the launch with the headline: ‘Netflix to deliver movies to the PC.’
The move was not without risk. Netflix had already been around for nearly a decade and had built up a great business delivering DVDs by mail. In fact, the shift to streaming set the company up for its biggest test. Netflix battled customer outrage in 2011 when it announced plans to split its DVD rental and streaming businesses into two brands, while hiking prices. The PR nightmare drove an even greater obsession at Netflix to ensure that the company was always doing the right thing for customers.
When Netflix launched its streaming business, its market valuation was roughly US$2 billion. Today, it's worth more than 70 times that amount. And while few could have predicted just how valuable the shift would be, it's a reminder of how quickly tech platforms can scale.
The proof is in the numbers. In its first 10 years of operations, Netflix grew quickly, but its total subscriber numbers (largely DVD subscribers) had not yet reached 10 million. By comparison, Netflix has added more than 140 million subscribers in the past decade globally, with a big chunk of that growth coming from markets outside the U.S. and Canada.
Of course, Netflix is not alone in controlling a fast-growing content platform. Spotify is estimated to be nearing 100 million paying subscribers worldwide. Apple Music and Amazon Prime Video are also growing like weeds.
For traditional players, the question is: can the Netflix model be replicated? Big media companies continue to roll out their own streaming offerings. And later this year, we'll see one of the most high-profile examples to date, as Disney prepares to launch its own streaming service.