Netflix subscriptions soar as viewers move to internet TV

Netflix gained seven million subscribers in the fourth quarter of 2016, riding on a wave of the ‘big adoption’ of internet TV

Reed Hastings, CEO of Netflix, takes the lead as the world turns its back on traditional TV broadcast technology

In the last quarter of 2016, Netflix exceeded its own forecasts by attracting a record seven million new subscribers, according to new numbers released on January 18. Just 10 years after the company initially launched its streaming service, Netflix has now amassed a total of 93.8 million members. The company generated $8.3bn in global streaming revenue over the course of 2016, achieving a massive 35 percent year-on-year growth.

The company’s success has been fuelled by a large-scale shift in the way that people are viewing television, with scheduled programmes being replaced by internet streaming and video on demand. “Think of it as this big adoption of internet TV”, said Netflix CEO Reed Hastings.

Netflix’s success is part of a much broader trend in the expansion of internet TV, which is rapidly moving forward in various different forms

Subscriptions to Netflix are influenced by the timings of the launch of various shows and films. The company’s quarterly letter to shareholders cited numerous popular releases of original content as being powerful drivers of its success this quarter, including Narcos, The Crown, Stranger Things, and Gilmore Girls. The timing of releases, according to Hastings, leads to “some lumpiness” in quarter-to-quarter growth. Crucially, however, he noted that “the big picture is remarkably steady”.

Netflix’s success is part of a much broader trend in the expansion of internet TV, which is rapidly moving forward in various different forms. The company letter stated: “It’s becoming an internet TV world, which presents both challenges and opportunities for Netflix as we strive to earn screen time.”

Amazon Prime, a rival streaming platform, has also seen a rapid expansion, and now has a territorial footprint matching that of Netflix. In addition, video is featuring increasingly on Facebook, while consumption through YouTube is still greater globally than either Netflix or Amazon Prime. Netflix’s letter also mentioned Apple as potential competition, citing rumours that it is looking to add video to its music service. Furthermore, firms like in France and Hulu are building their online presence by creating internet interfaces for TV network bundles.

The structure of the television industry will no doubt see a substantial shakeup in the wake of this shift towards online platforms. The shareholder letter predicted that “the next decade will be even more amazing and tumultuous as internet TV supplants linear TV, and as we strive to remain a leader”.

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