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Why Netflix's International Bet Will Pay Off For Investors

Netflix's CEO Reed Hastings said in an April letter to shareholders that the Los Gatos, Calif.-based company added 1.75 million international subscribers in the first-quarter, bringing its total to 12.7 million members.

"Due to rapid growth in our international segment we aren't experiencing the same level of seasonality as in the U.S., and we anticipate over 50% y/y growth in Q2 net additions despite slight headwinds from the World Cup," Hastings said in the letter, which coincided with first-quarter earnings.

Netflix's overall domestic streaming subscriber total topped 35 million in the quarter. Hastings has repeatedly said that Netflix's total addressable market in the U.S. is between 60 and 90 million households, but throughout the world, it's "everyone who loves TV and has the Internet," he said during the first quarter conference call.

Netflix has seen wide success with its original content series, most notably House of Cards and Orange is the New Black. The streaming service is looking to add more original content, specifically for children. Creating original content is one reason why Netflix decided to raise its prices for new subscribers. It will now charge new customers a monthly fee of $8.99 in the U.S., while existing customers will stay at the $7.99 price for a period of two years.

"While we acknowledge Netflix's international expansion does come with some competitive risk, we believe the company has a strong track record of entering new markets with significant competition, such as the UK," Anmuth penned in the note. "We're confident Netflix can demonstrate meaningful penetration in international markets given the company's strong slate of existing and upcoming originals, breadth of catalog content, and the ability to effectively market its service and content to new and existing customers."

Shares of Netflix were falling 0.36% to $421.70 on Thursday.



--Written by Laurie Kulikowski in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
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