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Netflix Reaches 100 Million Members, But It’s Spending Big To Keep Them Happy

Back in April, Netflix CEO Reed Hastings announced they had breached the 100 million member mark, which is a pretty decent effort.

The streaming video service made that info public in the midst of a slower than expected first quarter, but the past three months have been nothing short of top notch.

During the second quarter, they added another 5,2 million members worldwide, a significant increase on the 3,2 million they had predicted.

Plotted on a graph, it all looks like very good news:

That growth is largely down to the international market, and for the first time in the company’s history there is an even split:

Netflix isn’t shy to invest in producing their own content, as well as securing some of TV’s biggest hitters, and that doesn’t come cheap.

Below from Quartz:

The stellar lineup has come at cost, however. Netflix has been burning through cash to pay for its programming, and expects to do so for the foreseeable future.

“With our content strategy paying off in strong member, revenue and profit growth, we think it’s wise to continue to invest,” Netflix said in its earnings release…“In continued success, we will deploy increased capital in content, particularly in owned originals, and, as we have said before, we expect to be [free cash flow] negative for many years.”

The company had negative free cash flow of $608 million during the second quarter of 2017, putting it further in the red than the $472 million negative free cash flow forecast by analysts, according to FactSet data.

To the graph:

That might look bad, but all remains upbeat with the stock price:

Netflix’s shares were trading up around 11% at $178.85 after the closing bell, and at the time of this writing.

It helped that revenue rose 32% to $2.8 billion during the quarter, and that earnings rose to 15 cents per share, up from 9 cents per share a year earlier.

I guess the old saying rings true: you have to spend money to make money.

Then again, many years ago everyone said VCR and DVD rental stores would never go under.

Only time will tell.

[source:quartz]

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