Netflix Smashes Subscriber Growth Expectations On The Worldwide Appeal Of ‘Bright’, ‘Stranger Things’ And ‘Dark’

If you listen to enough executives talk on quarterly earnings calls with investment analysts and journalists, you get a sense for which ones stick to buzzwords and talking points and which ones candidly tell you how their businesses work because knowing how it works doesn’t mean you can do it.

Netflix’s executives are the latter.

“The film Bright and certainly Stranger Things Season 2 not only landed really well with viewers and consumers but were also were perfectly global,” content chief Ted Sarandos said Monday during the company’s quarterly video presentation on YouTube, “meaning that the watching was distributed almost exactly like our member base is. A good story told well is a global product.”

That’s actually pretty revealing. Sarandos is saying that two of the streaming service’s top original properties during the fourth quarter of 2017 were watched by roughly the same percentage of non-U.S. subscribers as U.S. subscribers. That means, relatively speaking, that Bright and Stranger Things are as popular in Germany, India and Brazil as they are in the United States.

Netflix doesn’t break down its subscribers by country except for the United States, though, so the company is saying Bright and Stranger Things are as popular in India as they are in the United States on a per-subscriber basis but not telling you how many subscribers Netflix has in India. But Netflix knows that the investment analysts know more or less how many subscribers the company has in India — and other statistical minutia — because CEO Ted Sarandos will say things like “as you know from your channel checks” or “which I know you won’t be surprised to hear.”

Morgan Stanley analyst Benjamin Swinburne estimates that Netflix has 1.1 million subscribers in India, which is fewer than in Germany, where Swinburne estimates that Netflix has 2.9 million subscribers. Those numbers work out to Netflix being in 5 percent of broadband households in India and 9 percent of broadband households in Germany.

Other media analysts have their own estimates — based on those “channel checks,” which just means data that the media analysts got from research rather than from Netflix. Netflix doesn’t confirm the various analysts’ thousand points of statistical minutia, but the company is transparent enough with them to be candid about why Netflix is performing better per capita in Germany than India.

“When we compare to Latin America several years ago, we’re very pleased with the progress we’re making through India, through Southeast Asia, through Japan,” Netflix CEO Ted Sarandos said during the Monday presentation. “All across the board, we’re seeing growth penetrations that look like the first couple of years of Latin America, which has worked out very well for the company.”

Netflix had forecast in the fall that it would add 6.3 million worldwide subscribers during the last three months of 2017 and announced in its earnings letter Monday that it actually added 8.3 million subscribers during the quarter. Most analysts had predicted something closer to Netflix’s forecast. One of the reasons Netflix executives attributed to why it outperformed its estimate was that the cancellations that Netflix had expected from a 10 percent price increase late last year in most of its worldwide markets was lower than Netflix had expected.

With question after question — on A/B testing, on pricing, on programming, on subscriber growth — Netflix’s CEO and top content, finance, product and investor relations executives respond like real people who speak the same English you’d recognize from normal conversation. In several instances, Sarandos and Hastings would play something like Good Cop / Bad Cop with Sarandos saying something tentative and Hastings following with something more blunt.

When asked whether $8 billion was the right amount for 2018 content spending, Sarandos answered: “At some point if we’re not growing viewing hours and not growing subscribers and not growing enjoyment, then you hit a point of diminishing returns. We just haven’t seen that yet.” Hastings followed with a simple declaration that Netflix would spend more than that in 2019 and even more in 2020.

When discussing Netflix’s marvel shows like Jessica Jones and Luke Cage, Sarandos characterized the shows this way: “The Marvel series that Disney produces for us — we own those shows, and they run until we cancel them.” Hastings response: “When we say we own those Marvel shows, we get to use them for a very long time. The underlying copyright in that case is still owned by the Marvel side.” It was a simple correction for the sake of precision and clarity.

Even when he speaks in language that sounds boastful of Netflix’s success or dismissive of competitive threats, Hastings never disappears into the hedgy, made-up business speak of his counterparts in other companies, the oversimplification of the Reality Distortion Field that surrounded Steve Jobs, or the cruder hyperbole and verifiable untruths practiced by Donald Trump.

“Disney with its unique brands and strength of content will have some real success,” Hastings said. “I know I’ll be a subscriber of it for my own personal watching just as many Disney and Fox executives subscribe to Netflix and watch our shows. We’ll all learn from each other, and total streaming will grow faster because of the competition.”

Netflix does not disclose comprehensive viewing data for its originals and drops vague nuggets like this one from Monday’s earnings letter about the German-language drama series Dark, which has become a sleeper hit: “Dark, in addition to being well-received in its home country, has also been viewed by millions of members in the US and has outsized watching throughout Europe and Latin America.”

That secretiveness and selective data-dropping has earned Netflix a reputation for being opaque, but that’s largely a function of a programming strategy that puts a premium on message management and building publicity for a new series or film to peak on the premiere date. On matters of defining and describing its business plan, Netflix is far more transparent.

If you watch one of Netflix’s quarterly earnings presentations, you’ll see a company’s top executives tell you what’s working, what’s not working as well as they’d like, and what the strategy is going forward. That’s the easy part. The actual doing — designing a recommendations algorithm, delivering 4K video at lower bandwidths, running Emmy campaigns, developing the next Stranger Things — is where Netflix has separated itself from the pack.

Scott Porch writes about the TV business for Decider, is a contributing writer for Playboy, and hosts a weekly podcast about new digital content called Consumed with Scott Porch. You can follow him on Twitter @ScottPorch.