Netflix’s subscriber growth might not have been as impressive as investors had hoped last quarter, but the company is still in great shape. Why? Simply put, it’s because customers absolutely love the service. Happy customers are repeat customers, and they also obviously help the service grow by crowing about it to friends and on social networks, which leads to new sign ups and more happy customers.
But why do Netflix subscribers love the service so much?
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Netflix reported its third-quarter earnings on Wednesday afternoon, missing The Street’s expectations in a number of key areas. Move a block or more away from Wall Street in any direction though, and the company turned in a fine quarter, during which it racked up $1.76 billion in revenue and added 880,000 new subscribers in the United States.
During the company’s conference call following its earnings release, CEO Reed Hastings and CFO David Wells covered a wide range of topics surrounding Netflix’s Q3 performance and its business in general. In a transcript of the call published by Seeking Alpha, we can also see an interesting tidbit about Netflix as compared to traditional TV.
From Hastings, in response to a question from an RBC analyst:
When we look at the last couple of years, where we’ve been — last four years, we’ve been about 6 million net adds in the U.S., and then accelerating number of new members internationally. But restricting the comments to the U.S., it’s fundamentally that internet TV is better than linear TV. The consumers can watch when they want, on what type of device they want, and the content has just got better and better.
So the fundamental confidence about the large scale is because on-demand is a better experience than linear, and the entire market is going to move from linear to on-demand internet television over the next 10 to 20 years.
Netflix users all have their own opinions on what makes the service great, but now we know exactly what CEO Reed Hastings thinks. And yes, just as you might have presumed, the simplest explanation is the best one — Hastings thinks Netflix has an advantage over traditional TV because of the very nature of Internet TV. You can watch anything you want at any time, and you can watch on any device.
