From Germany to Brazil, Netflix stormed ahead in its drive to create a global television network, scoring the\u00a0video-streaming provider\u2019s best third quarter on record and sending the shares to a new high.<\/p>\n
Shows such as thriller \u201cOzark,\u201d starring Jason Bateman, \u201cAmerican Vandal,\u201d a spoof of true crime shows, and a Jerry Seinfeld stand-up special helped lure 4.45 million customers abroad and 850,000 in the US, both ahead of estimates. They came at a cost.<\/p>\n
The company is paying $6 billion for programming in 2017 and said Monday it\u2019ll increase that by as much as a third next year.<\/p>\n
The tricky part for Netflix is balancing its push for subscriber growth with the need to cover its soaring programming budget. This month, Netflix raised prices by $1 a month, or 10%, for its most popular plan in the US and UK, funds that will help defray soaring costs.<\/p>\n
In the past, price increases have led to more customer turnover. Growth slowed for just that reason in 2016.<\/p>\n
With prices rising, the Los Gatos, California-based company forecast U.S. subscriber growth that\u2019s less than analysts had estimated, though its outlook for international growth surpassed their projections.<\/p>\n
Netflix rose as much as 4.1% to $211 in extended trading after the announcement before easing to $205.20. The stock gained 1.6% to $202.68 at the close in New York and is up 64% this year.<\/p>\n
The company\u2019s ever-growing budget for movies and TV shows worries competitors who are under pressure to up their own programming outlays while still increasing profit.<\/p>\n
Investors have allowed Netflix to borrow and burn through cash to fund its growth, while punishing media stocks such as CBS Corp. and Walt Disney Co. as they\u2019ve lost viewers or advertisers.<\/p>\n
Those companies are now creating their own online services, and some, such as Disney, are pulling programming off Netflix.<\/p>\n
In response, Netflix is stepping up spending on original shows, which will account for more than 25 percent of the company\u2019s programming budget in 2017 and continue to expand.<\/p>\n
In all, the company\u2019s 2018 programming budget will be as much as $1 billion larger than previously forecast.<\/p>\n
\u201cInvestors often ask us about continued access to content from diversified media companies,\u201d the company wrote in a letter to shareholders.<\/p>\n
\u201cWhile we have multi-year deals in place preventing any sudden reduction in content licensing, the long-term trends are clear.\u201d<\/p>\n
During the quarter, the company signed a production deal with Shonda Rhimes, creator of hit shows including \u201cGrey\u2019s Anatomy,\u201d and made its first-ever M&A deal for Millarworld, the home of comic book writer Mark Millar.<\/p>\n
International Shows<\/strong><\/p>\n Netflix has also boosted its investment in original programming in other languages\u00a0to charm overseas who may not be interested in a New York stand-up comedian like Seinfeld, or \u201cOzark,\u201d a crime drama set in the US Midwest.<\/p>\n The company just released its first Italian original series, \u201cSuburra,\u201d and will have programs in Japanese and Germany later this year.<\/p>\n Third-quarter net income more than doubled to $130 million, or 29 cents a share, the company said on its website. Revenue grew 30% to $2.99 billion, beating estimates. Total streaming subscribers rose to 109.3 million.<\/p>\n Netflix shares rose on Oct. 5, when the company announced the latest price increase, suggesting investors fear little damage this time around. Customers will be willing to pay more for a subscription because Netflix is spending more, the company has said.<\/p>\n
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