In Netflix’s Q1 2016 earnings report issued today, the company boasted that it now has more than 81.5 million members and its earnings per share were $.06, beating analysts’ estimates by 50%. But the numbers weren’t enough to impress Wall St. Netflix stock fell 11.6% in after hours trading to $98.88 a share, following a 2.8% decline during normal trading hours.
The drop is being attributed to Netflix’s lower-than-expected projection for subscriber growth. The streaming giant said today that it expects to add 2.5 million subscribers in Q2 2016 — less than half as much as it did during Q1 — with one-fifth coming from the U.S., and the rest from other territories.
In January, Netflix announced that it had expanded to a total of 130 territories around the world, and subscriber growth reflected its increasing global focus. In Q1, it added 2.23 million subscribers in the US. and 4.51 million internationally.
“We are pleased Netflix is finding acceptance around the world,” wrote Netflix CEO Reed Hastings in the company’s quarterly letter to shareholders. “We have lots of work to do to make Netflix more relevant market by market, but the opportunity is amazing.”
While Hastings platitudes about future growth in the letter weren’t very illuminating, he did offer up some interesting tidbits in the afternoon conference call with investors, where he was joined by Netflix’s chief content officer Ted Sarandos and its chief financial officer David Wells.
Netflix is not interested in acquiring a studio. “It’s been 15 years we’ve been public and 20 existing, and we’ve done no M&A, so I think that probably speaks for itself,” Hastings said. Sarandos added that, with Netflix increasingly serving as both the producer and the network for its shows (e.g. “The Ranch”), the company is already building studio capabilities in-house.
No plans for virtual reality/360-degree video any time soon. “I think it’s mostly going to be an intense gaming format for a couple of years due to the price of the consoles,” Hastings said, adding, “watching a TV show in a VR headset… I don’t think that will be very popular.”
Data saving options coming for mobile. When asked about complaints about Netflix reducing the quality of streams on certain wireless carriers, Hastings said the company was attempting to save its users from paying “$10 to $20 per gigabyte” for data overages. “What we’ll be adding going forward is an option so the consumer can set whether they want to do extreme data saving, moderate data saving or no data saving at all,” Hastings said.
“There is [still] no interest in live sports currently,” Sarandos said, or live programming in general, for that matter. While Chelsea Handler’s upcoming Netflix talk show “Chelsea” will be “near-live,” available a few hours after recording, Netflix’s brand proposition is “on-demand” and it plans to stay that way.
Netflix expects to surpass the 100M subscriber mark next year.
“When you think about in the long term, everybody around the world is going to be watching internet video, and we want to be well-positioned so as all of these countries evolve towards internet video, that we grow with them,” Hastings said. “It’s a long-term investment, and country-by-country, it’s worked out extremely well for us.”