As we wrote yesterday, the scant offerings Australian TV networks have given us over the two months of summer have made the attractions of streaming video services even more alluring. We now have more evidence for that: Netflix’s December quarter figures show the streaming video giant ended the year with a bang and expects to continue growing rapidly this year, with more of its growth coming internationally from markets such as Australia.

In fact, Netflix’s international operations are now starting to be a primary driver in the overall business, meaning the company is positioning itself to be the world leader when US rivals Hulu, CBS All Access, Fox/Disney and anyone else finally get their acts together (which could start in 2019) and start offering global services. Investors have recognised it as the frontrunner, spurring Tuesday’s rapid rise in the company’s share price — more than 14% — which pushed the company’s market value well past $US100 billion for the first time in normal trading and setting a high base for the company’s performance this year.

Tuesday’s price rise brought Netflix’s 2018 gain to nearly 31%, making it the top riser in the S&P 500, with nearly five times the gain for the benchmark. Netflix’s market capitalisation ended the day at $US108 billion, putting it ahead of the likes of Nike and Goldman Sachs, and just behind oilfield services company Schlumberger. Last year, Netflix shares gained 56.4%, while the S&P 500 rose 19.4%. 

Over the full 2017 year, Netflix added 20.6 million subscribers. That’s in part to the growth of Netflix’s international streaming business, which now makes up the bulk of its subscriber base (57.8 million against 52.8 million for the US). By the end of the current quarter, Netflix reckons it will have around 118 million subscribers — 54.7 million in the US and more than 63.7 million internationally.

The three months to December saw Netflix add 8.3 million new subscribers (40% of the year’s total) — a new record for quarterly subscribers. Nearly 2 million of the fourth-quarter additions were from the US, and the other 6.36 million were from overseas (also a new record). And Netflix’s guidance for subscriber additions in the current quarter is 6.4 million (the first quarter is slower than the final, holiday dominated three month period), compared to 5 million added during the March quarter of last year. People are watching Netflix more — average streaming hours per membership grew 9% in 2017.

Given this out-performance you have to wonder how long it can last. A stumble in a quarterly report falling short of expectations could very well trigger a sell-off that might spread to other big tech faves such as Apple, Alphabet and Facebook.

Peter Fray

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