Netflix added three million subscribers—two million at home and one million outside the US—in the first three months of 2013, returning the subscription video service to profitability and sending its stock up nearly 25% in after-hours trading. Here’s a look at Netflix subscriptions over the past seven quarters:
There are several ways to look at Netflix’s recent success. Here are four of them, all superlative.
Netflix has more American subscribers than HBO
After several strong quarters of growth, Netflix now has 29.2 million people in the US subscribed to its $8-a-month streaming plan, which is, for the first time, greater than HBO’s domestic subscription base of 28.7 million. HBO’s figure dates to the end of 2012, but it’s unlikely to have grown much in the first three months of 2013, owing as much to the cable TV industry’s stagnation as its own trouble signing up new subscribers. (Outside the US, the situation is much different: HBO has a huge lead over Netflix.)
The comparison between Netflix and HBO isn’t perfect, but they increasingly appear to be on similar trajectories. Both started by offering only movies that had long been out of theatres, then ventured into original programming—HBO in 1997 with Oz and Netflix earlier this year with House of Cards. Meanwhile, all of HBO’s customers buy it as an add-on to existing cable TV subscriptions, but HBO Go now offers all of the network’s programming over the internet, like Netflix. At the moment, it’s just a free perk for existing subscribers, but executives at HBO parent Time Warner have been hinting at a future when HBO Go is sold directly to consumers.
“The goal is to become HBO faster than HBO can become us,” Ted Sarandos, Netflix’s chief content officer, put it recently.
Netflix is the most watched “cable network” in the US
Of course, Netflix isn’t a cable network, but it competes for attention with television fare beyond just HBO. And in that context, Netflix commands more attention—87 minutes per US household per day—than any American cable network, according to an estimate pulled together earlier this month by BTIG analyst Rich Greenfield (registration required).
That’s just slightly more than the Disney Channel, which is not a coincidence: Netflix has a large of catalogue of children’s programming, and some of its most loyal subscribers are parents who use Netflix as a babysitting tool. Later this year, Netflix will debut an original show about a speedy snail, which should appeal to children and another core Netflix demographic: stoners.
The watching time data is important because Netflix depends on loyalty to retain subscribers, and the more people use it, the more valuable they are likely to find the service. Both Netflix and HBO have had trouble with churn, or people dropping their subscriptions, because people see them as luxury expenses that can be easily trimmed when budgets get tight. HBO uses HBO Go as a carrot to keep subscribers; Netflix has tried to add more and better programming. Both strategies seem to be working.
Netflix is America’s biggest bandwidth hog, by far
As TV and the internet converge, it’s increasingly important to look at what content is dominating those pipes. For now, it’s Netflix. And it’s not even close.
During peak periods of internet use in the US, Netflix constitutes 33% of all downstream traffic, which means content that goes into the device instead of out, according to broadband network provider Sandvine (pdf). That’s more than Google’s YouTube (14.8%), BitTorrent (5.9%), Apple’s iTunes (3.9%), Amazon Video (1.8%), and Facebook (1.5%), among others. Netflix isn’t as dominant in mobile internet use, where it has just 2.7% to YouTube’s 31%, but that’s the next battleground.
Bandwidth is a good metric to watch because it arguably measures the depth of attention commanded by these big media companies. Facebook obviously controls a large share of internet use, but the content it serves isn’t as rich, or bandwidth-heavy, as YouTube or Netflix. In theory, the richer media should ultimately translate into more revenue.
Netflix is the S&P’s best performing stock of the year
If its after-hours surge holds up when the markets open again tomorrow, Netflix will be the top performing stock in the S&P 500 this year, up 134%. It’s already the best S&P stock since the market’s previous peak in 2007.
Netflix stock tanked in the middle of 2011 after a poorly handled price hike, then stubbornly refused to recover as investors fretted about the increasing costs of content. Those costs continue to rise, but Netflix has been able to show strong subscriber growth and convince investors that it has a strategy. This, despite companies like Hulu and Amazon increasingly competing with Netflix for existing and original content.
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