Netflix increased its subscription rates in October, but the higher prices did not hold the streaming service back from booking a record-breaking fourth quarter in 2017.
The performance of Netflix sent shares soaring and pushed its market capitalization to over $100 billion for the first time.
Netflix Adds Over 8 Million Subscribers
At the start of the fourth quarter, Netflix subscription rates were increased. The basic plan remained at $7.99 per month, but the standard Full HD plan increased its monthly rate from $9.99 to $10.99 and the premium 4K plan increased from $11.99 to $13.99.
There were concerns that the higher charges would slow down Netflix's subscriber growth. However, according to the company's fourth-quarter 2017 results, the increased subscription rates did not matter at all.
Netflix added over 8.4 million subscribers from October to December last year, which is the highest subscription increase in a quarter over the company's history and beating the expected figure of 6.3 million new subscribers. Most of the new Netflix users, about 6.36 million, came from overseas markets, as the service expanded into new countries. The remaining 2 million new Netflix users were from the United States.
"They blew the subscriber numbers out of the park," said CFRA Research senior equity analyst and director Tuna Amobi. "It seems like the price hike was well-received, clearly from these subscriber numbers."
There are now almost 117.6 million Netflix subscribers, with 110.6 million paying subscribers and the rest currently on trial periods. The company also posted adjusted earnings of 41 cents with a net income of $186 million in the fourth quarter, compared to a net income of $67 million in the same period of 2016, with a revenue of $3.29 billion.
The Growth Of Netflix
Netflix said that the massive increase in new subscribers was partly due to its original content, headlined by hits such as Stranger Things, Orange is the New Black, The Crown, Black Mirror, and many more.
The company will look to further strengthen its collection of Netflix original content, as it revealed last year that it will spend $8 billion in 2018 for programming.
"Netflix is pouring more and more money into making content, and it is directly translating into more subscribers," said Richard Greenfield, an analyst for BTIG. "They see a huge opportunity and they are moving as fast as they can to attack it."
Earlier this year, a report placed the likelihood that Apple will buy Netflix at 40 percent. The continuous growth of Netflix will make its acquisition more expensive, but Apple still has the cash to make a deal. The question is whether Netflix will agree to be purchased, or will it stay on course for what appears to be more months of subscriber and revenue growth.
