Netflix Gears Up for ‘Substantial European Expansion’

BEVERLY HILLS: In its letter to shareholders announcing Q4 financials, Netflix said that strong international net additions and shrinking contribution losses have helped to confirm its belief that European expansion is a solid bet.

"We’re making great progress internationally, with strong member growth and contribution profit/loss improving sequentially in all of our markets (with the exception of the Netherlands as it had its first full quarter of operations and thus loss in Q4)," said Reed Hastings, Netflix's CEO, and David Wells, CFO. For the fourth quarter, there were 1.74 million net additions internationally, ending the year at 10.93 million members. For Q1 2014, Netflix is forecasting an almost 60 percent increase in net additions from the prior year, from 1.02 million to 1.6 million.

Domestic net additions in Q4 of 2.33 million were 14 percent higher than the year ago period. Netflix expects this momentum to continue into Q1 2014 as well, predicting net additions of 2.25 million to beat the prior year by around 11 percent.

Netflix also discussed tiered pricing. "Last April we introduced a 4-concurrent stream $11.99 option to begin our evaluation of plan tiering. Since late last year, we have also been testing 1-stream and 3-stream variants, as well as SD/HD variations, at various price points. Eventually, we hope to be able to offer new members a selection of three simple options to fit everyone’s taste." They added: "If we do make pricing changes for new members, existing members would get generous grandfathering of their existing plans and prices, so there would be no material near-term revenue increase from moving to this potential broader set of options. We are in no rush to implement such new member plans and are still researching the best way to proceed."

The company also touted the success of its original content offerings, noting the slew of major award nominations and wins. Beyond fully original series, Netflix recognizes the value of exclusive premieres, mentioning the upcoming Breaking Bad spin-off Better Call Saul.

Netflix earned $48 million during the final three months of 2013. That compared to $8 million at the same time in 2012. Revenue rose 24 percent from the previous year to nearly $1.17 billion, just slightly above analyst forecasts.