This column has been updated to include a preview of Netflix's upcoming earnings report.
Expectations are high going into Netflix's (NFLX - Get Report) first-quarter earnings report, which arrives after the close on Monday afternoon. With the help of the very strong Q4 report and solid Q1 guidance it delivered in January, shares are already up more than 18% on the year, leaving the streaming giant sporting a $63 billion market cap and trading for more than seven times its 2016 sales.
On Monday morning, shares of Netflix were rising 2.7% to $146.78.
Analysts on average expect sales to rise 35% annually in Q1 to $2.64 billion. Netflix, for its part, has forecast it will add 1.5 million U.S. streaming subscribers and 3.7 million international subscribers, raising the sizes of its U.S. and international subscriber bases to 50.9 million and 48.1 million, respectively. Recent U.S. tracking data from research firm comScore shows just how dominant Netflix remains in the U.S., and why its local subscriber momentum remains strong in spite of high penetration rates.
As CEO Reed Hastings readily admits, Netflix has plenty of well-financed rivals in the battle for digital video viewing time. In the "Competition" section within its fourth-quarter shareholder letter, the company mentioned not only Amazon's (AMZN - Get Report) Prime Video as a rival, but also Alphabet/Google's (GOOGL - Get Report) YouTube, Time Warner's (TWX) HBO, CBS and BBC's online services, web TV offerings from satellite firms and Hulu, and even Facebook and Apple's video efforts.
In one sense, Netflix's perspective could be unsettling: The company is admitting many online entertainment alternatives exist. But in another respect, it's encouraging: Netflix is signaling that it's not fretting over its direct streaming rivals any more than it is over Facebook or YouTube's video services. Or, for that matter, any more than Facebook or YouTube fear that Netflix will eat their lunch.
Such an untroubled attitude is easy to question when one sees the pace at which Amazon is growing its content spending, or when one considers the popularity of hit HBO series such as Game of Thrones and Westworld. But comScore's recent numbers, together with Netflix's subscriber momentum, show why Hastings & Co. feel as they do.
ComScore's tracking data indicates that in December, Netflix was used by 75% of the 49 million Wi-Fi-connected U.S. homes that accessed an over-the-top (OTT) video service. That number by itself isn't too surprising, given Netflix reported having 49.4 million U.S. streaming subs at the end of December. The discrepancy between comScore's number and Netflix's can partly be explained by the existence of Netflix-subscribed homes that either didn't access the service or don't have Wi-Fi networks set up.
What is surprising is how much higher Netflix usage is than that for any direct rival. Though Amazon has been estimated to have about 50 million U.S. Prime subs, comScore reports Prime Video was only used in 33% of wi-fi-connected American homes (about 16 million of them). Even if one assumes there were a few million Prime Video-watching million homes lacking Wi-Fi, this suggests over half of all U.S. Prime subs might not be actively using the service.
Hulu, which reported having 12 million paid subs last May, was used by 17% of Wi-Fi-connected homes. But HBO Go, which is bundled with standard HBO subscriptions, was only used by about 5%. For those curious, YouTube -- not a direct Netflix rival, considering how much of its viewing involves ad-supported short-form content -- was used in 53% of homes, and Dish Networks' (DISH - Get Report) Sling TV in about 5%.
Editor's Pick: Originally published on April 13.
Also of note: Amazon is far from dominant in the 25% of tracked homes where Netflix wasn't watched. Less than 25% of those homes used Prime Video. About 15% used HBO Go or the standalone HBO Now streaming service, and 14% of them used Hulu. YouTube and (interestingly) Amazon's Twitch game-streaming service were each used in over 30% of these homes.
And just as Netflix has an unparalleled reach among U.S. subscription streaming platforms, it also claims unmatched subscriber engagement. ComScore states the average U.S. Netflix viewer in a Wi-Fi home watched the service on 12 different days in December. That's twice and three times, respectively, as many days as Prime Video and HBO Go were accessed by the average viewer. Hulu, at 9 days, was relatively competitive.
The numbers drive home the degree to which Netflix, backed by a $6 billion annual content budget, powerful content-recommendation abilities and strong cross-platform app support, has become a way of life for much of the American public in a manner that no direct rival can approximate. That can't be lost on content creators that care not only about the size of the check Netflix is cutting, but also about the exposure their content will get.
ComScore's figures also demonstrate a U.S. mindshare for Netflix that does much to explain why subscriber growth remains strong. Netflix added 1.93 million domestic subs in Q4, topping guidance of 1.45 million. Many American consumers now seem to view having a Netflix subscription to be as much of a no-brainer as shopping on Amazon or searching via Google.
It is possible that Amazon, which launched Prime Video in dozens of international markets in December, will cause more trouble for Netflix overseas. In cost-sensitive regions, Amazon's aggressive pricing could be a bigger draw. Whereas Netflix's standard plan goes for $10 per month, Prime Video is sold for $6 per month on a standalone basis outside the U.S., or bundled with Prime subscriptions.
For now, though, Netflix's international momentum is also solid: The company added 5.1 million international subs in Q4, blowing away guidance of 3.75 million. Netflix still has a ways to go in most big foreign markets before it can reach the kind of ubiquity it now enjoys in the U.S., but its domestic success does certainly provide a nice blueprint for becoming a household staple elsewhere.