Since Netflix reported weak first-quarter 2022 subscriber additions in April, there has been an onslaught of punditry about the demise of streaming which runs counter to many of our numbers and forecasts. We estimate 89 million U.S. paid streaming subscriptions were added in 2021 and forecast 80 million additions in 2022, and 50 million in 2024, all highly robust.

For the most part, streaming is a replacement for TV subscriptions, as well as for box office, packaged sales and rentals. With 6 million to 7 million U.S. TV subscriber losses per year — double the annual losses of a half-decade ago — TV is the gift that keeps giving for the streaming business. Between cord-cutters, cord-nevers and those who still subscribe to traditional TV, the penetration rate of households that pay for streaming is higher than it ever was for television.

At its apex in 2016, U.S. TV access and advertising was a $181 billion business, versus $158 billion in 2021. Based on our forecasts, it will tally $140 billion in 2024 and $105 billion in 2027. That’s not a pretty growth picture.

Meanwhile, U.S. streaming access revenue grew 37% to $39.4 billion in 2021, and we forecast revenue of $51 billion in 2022 and $69 billion in 2024. At its current run rate, streaming access revenue will be over $91 billion in 2027 and, when combined with TV programmers’ streaming advertising revenue, would be larger than the legacy TV business.

Assuming TV subscribers continue to decline at 6 million to 7 million per year, TV access providers will be effectively disintermediated by their programming suppliers. Hence within a decade, traditional TV will no longer exist and streaming will be the only show, game or movie in town.

Programming and now streaming behemoths The Walt Disney Co., NBCUniversal, Paramount Global and Warner Bros. Discovery are all seeing impressive streaming subscriber gains but at the cost of lackluster TV advertising and programming sales revenue growth. At the same time, they’re being constrained by Amazon, Apple, Google and Netflix, which together represent almost half of U.S. streaming access revenue.

Further, these major programmers will not reach, based on their own forecasts, streaming profitability until 2024-2025, as content spend has grown exponentially to keep up with Amazon, Apple and Netflix.

Programmers’ profitability predicament has been punished by Wall Street with stocks down on average over 40% year over year, not that Amazon or Netflix have fared any better. Further, Netflix was cash flow positive for the first time in 2020, but not in 2021, and we assume on a standalone basis Amazon and Apple’s streaming businesses are not profitable. 

Consumer Benefit, Provider Pain

Thus far, the only real beneficiary of streaming has been the consumer, who between paid and advertising-supported streaming can now assemble programming at lower cost than a TV subscription. Given the lack of stickiness of most streaming offers, consumers can also easily sign up and then churn off subscriptions. Streaming has also ushered in a massive rise and diversity of programming.

How much streamers raise prices, add advertising or limit free viewing going forward remains to be seen.

That streaming is only going to become more pervasive and end TV as we know it does not mean streaming is a great business for most.

All numbers in this article are from Convergence’s annual Couch Potato report series. 

Netflix, just weeks after telling the world that it would add about 2.5 million new subscribers in Q1 -- guidance that sent its stock down more than 25% in January -- is on a pace to nearly double that mark, according to Barclays Global media analyst Kannan Venkateshwar. 

Netflix watched its stock tank in January after reporting disappointing Q4 results and issuing guidance for Q1 subscriber additions that were well below past performance.  Adding to the concern was that Netflix traditionally adds a large portion of its full-year customers in Q1, so the falloff was seen as a signal that slower growth would at least be a year-long phenomenon. 

Netflix stock fell from $508.25 per share to $397.50 on January 21, and the shares have been on a roller coaster ride ever since, rebounding to $457.13 each on February 1 after a hedge fund and founder and co-CEO Reed Hastings purchased large blocks of shares. But that boost turned out to be temporary, as the stock was priced at $367.46 in early trading Thursday. 

In a research report March 3, Venkateshwar wrote that after analyzing data from several different sources -- including app downloads, Daily Active Users (DAUs), Monthly Active Users (MAUs) and credit card data -- the short-term picture could be brighter.

In his note, Venkateshwar acknowledged that no single data source was accurate enough to use as a single basis for quarterly trends, but taking the average came closest to mimicking actual performance. 

“Based on this method, Netflix appears to be trending at ~4 million subs in Q1, better than company guidance,” Venkateshwar wrote. “Performance in line with this could be a bit of relief relative to [the] company’s low guide of 2.5 million, but would still imply full year performance of 16 million, lower than present consensus estimates of ~18 million (Barclays at 14 million).”

January engagement growth was better than February, as DAUs and downloads slowed in many countries. But the Asia-Pacific region was quite strong, which gave the analyst some hope that Q1 will be better than expected. 

And though Netflix's release slate was weaker during the first two months of the year, in March it appears to be picking up, largely on the back of a greater number of movie titles than in the prior year, the analyst wrote. 

Also: Wolk: Movies May Be The Answer to Netflix’s Problems After All 

At the same time, Venkateshwar noted that rival streaming services like HBO Max and Peacock are showing added signs of strength, while Disney Plus remains volatile. 

The analyst wrote that while Disney Plus downloads and MAU numbers were up sequentially in January, they showed some weakness in February. Engagement growth at its Star Plus content hub, which launched in February 2021 in Canada, Western Europe and parts of Asia, also appeared to slow sequentially, he wrote.

According to Venkateshwar, HBO Max downloads in December by 2% over the previous month, with January up 13% and February rising14%. At Peacock, December downloads were down 11% compared to the prior month, rising 6% in January and 86% in February. At Disney Plus, excluding its Hotstar service in India, month-over-month downloads were up 1% in December, 20% in January and down 27% in February. 

The analysts attributed HBO Max’s performance to a string of strong original releases like Euphoria, The Gilded Age and Station Eleven, while Peacock’s growth was likely driven by the Olympics. 

Netflix stock fell as much as 25% on Friday after the SVOD pioneer slightly missed subscriber growth targets in Q4 and issued weak guidance for the future, forcing some analysts to rethink their prior bullish stance on the stock.

Netflix shares were trading as low as $380 each on Friday morning, down 25% or $128.25 per share. The stock closed at $397.50, down 21% for the day.

Other streaming-heavy stocks fell as well. The Walt Disney Co., whose own Disney Plus service has shown some signs of slowing subscriber growth, was down 7% to $137.41, while Discovery Inc., which launched Discovery Plus last year and is in the process of merging with HBO Max parent WarnerMedia, fell 4.7% to $26.19 per share. ViacomCBS, whose Paramount Plus service was revamped last year, fell 7.4% to $31.25 each.

While the Q4 subscriber miss had a lot to do with Netflix’s decline -- it added 8.3 million new customers in the quarter, slightly below consensus estimates of 8.5 million additions -- the real damage came in its guidance for Q1. Netflix estimated that it would add about 2.5 million new customers in Q1, its lowest growth in years and particularly surprising given the first quarter’s influence on the rest of the year. Since 2017, Q1 additions have represented an average of 29% of total full year subscriber additions, according to MoffettNathanson media analyst Michael Nathanson. Using that average, Netflix could add as little as 8.5 million new subscribers in 2022. In contrast, it added 18.2 million new customers in 2021 and 36 million in 2020.

Also: Has Nielsen Been Shortchanging Netflix on Streaming Metrics? 

Adding to the concern is that Netflix had some of its most-viewed content in the past year -- Red Notice and Squid Game. If content like that wasn’t enough to drive subscriptions, what will?   

It wasn’t too long ago that a lot of analysts considered Netflix bulletproof, consistently adding subscribers and expanding its reach to the rest of the world on its way toward 300 million global subscribers by 2023. While domestic customer growth appeared to begin to level off in recent years -- Netflix has about 75 million customers in the U.S. and Canada -- international markets were expected to more than take up the slack.

But in Q4, the opposite appeared to happen. Domestic growth at 1.2 million new paying customers was nearly five times consensus estimates of 250,000 additions. Europe and the Middle East also outperformed -- 3.5 million additions versus 3.3 million consensus -- while Latin America and Asia underperformed severely. Analysts had expected Netflix to add about 1.2 million new customers in Latin America -- it added 925,000 -- and 4.1 million in Asia -- it added 2.6 million. 

That sent a signal to analysts that what was thought to be an unstoppable streaming juggernaut had an Achilles heel, and sent them to their excel spreadsheets to recalculate the future.

Barclays media analyst Kannan Venkateshwar, Morgan Stanley media analyst Ben Swinburne, Evercore ISI Group media pundit Mark Mahaney and Macquarie media analyst Tim Nollen all reduced their overall ratings and slashed their 12-month price targets on Netflix stock. Other analysts like Nathanson and Wells Fargo’s Steven Cahall maintained their overall ratings on Netflix, but slashed their price targets.

Nathanson kept his “neutral” rating on the company but cut his 12-month price target by $85 to $375 per share. Cahall maintained his “overweight” rating on the shares, slashing his price target by $200 to $600 per share and adding in a note to clients that the Q1 guidance “has investors rethinking the growth path.” 

Venkateshwar, who has been bullish on Netflix in the past, reduced his rating to “Equal Weight” and wondered if the slowdown expected in Q1 is a longer-term phenomenon. 

In his research note, Venkateshwar wrote that Netflix’s Q1 guidance “plays almost perfectly into the bear thesis” for the stock, as it will be its lowest growth target ever. And because Q1 usually is a big part of overall annual growth, the analyst speculated that the lower guidance could mean that 2022 will be significantly lower than 2021.

“Both the Q1 guide  and ’22 margins were among investor concerns going into earnings and seem to have been validated based on guidance,” Venkateshwar wrote. “Overall therefore, based on company guidance, 2022 is effectively shaping up to be the company's slowest year of growth on most KPIs.” 

Swinburne dropped his rating on the stock from “Overweight” to “Equal Weight,” and slashed his price target to $450 from $700 per share, adding that he expects content spend to continue to rise as subscriber additions slow. 

Macquarie’s Nollen dropped his rating on Netflix to “underperform” from “neutral” and slashed his price target to $395 per share, adding that he was concerned about increased competition and how that could eat into the SVOD giant’s  international growth. 

“Competition is intensifying, especially internationally,” Nollen wrote “This is becoming a bigger problem now: for example a combined Discovery/Warner this year brings strong brand recognition to many countries, with lower-priced ad-supported tiers, while other players like Paramount [Plus] and NBCU are joining forces in Europe on distribution.”

At Evercore ISI, Mahaney dropped his rating on the shares from “outperform” to “in line,” reducing his 12-month price target from $710 to $525 per share. In a research note, Mahaney said that while there are many excuses for the Q4 miss and lower Q1 guidance -- including heightened near-term churn due to an expected U.S. price increase, increased competition, market maturity, the ongoing pandemic and the late Q1 release of key content like Bridgerton -- the “negative inflection implied by the Q1 guidance is significant.”

Mahaney dropped his full year 2022 subscriber growth estimates by nearly 40% to under 17 million new customers from 26 million previously. 

While Mahaney said this could be a one-off and Netflix could recover its subscriber mojo, he noted it also could be a sign of Netflix’s maturation in key markets. And though he wrote that he has been a consistent buyer during other ebbs and flows at the company -- this isn’t the first time it has missed quarter subscriber targets -- he believes this time may be different. 

In his note, he said the reason for the downgrade was twofold -- the Q1 guidance “implies a real, surprising negative inflection point in the company’s growth outlook;” and the shift changes his growth equation for the company from one based on unit and subscriber growth to one based on price and average revenue per customer, “which makes it less attractive/sustainable.” ■

Cable operators, already gearing up for a slowdown in broadband subscriber growth in the fourth quarter, are likely to see a slight overall deceleration of mobile phone customer additions in Q4, driven by lighter numbers at Charter Communications, according to J.P. Morgan media analyst Phil Cusick.

Cable operators have already warned that the expected slowdown in broadband customer growth could get steeper in Q4. Comcast Cable CEO Dave Watson told a virtual audience at the UBS TMT Virtual Conference in December that it would likely add about 1.3 million broadband customers in 2021, implying that Q4 additions would be about 185,000, its lowest quarterly growth since Q2 2017. Watson was echoed by other cable execs at the conference like Altice USA CEO Dexter Goei, who implied that Q4 broadband subscriber growth could be negative in Q4 and for the year. 

But mobile service was expected to continue its torrid growth pace. Comcast’s Watson predicted that his company would add a record number of mobile customers in the quarter, beating its previous best of 285,000 additions in Q3 2021.

Also: Comcast Q4 Broadband Results Narrowly Miss Consensus; Dividend Upped

In a research note Thursday, Cusick wrote that he expects Comcast to surpass that old mark, adding about 300,000 mobile customers in Q4, ending the year with 1.14 million additions. But he believes Charter will add about 260,000 mobile subscribers, below the 315,000 it added in Q4 2020. He estimated Altice USA would add about 2,000 mobile customers in the quarter, down from 7,000 in Q4 2020. 

Overall, Cusick expects cable to add about 562,000 mobile customers in Q4, implying a 20%  share of total growth for the sector in the period, compared to 23% in Q4 2020. For the full year, Cusick estimates that cable will add 2.23 million mobile customers, or about 24% of total ecosystem growth, compared to 35% in 2020. 

Cusick sees the slowdown continuing into 2022, forecasting that Comcast mobile subscriptions will be about 1.047 million next year, and Charter slipping to 1 million additions. Cusick predicted that Altice USA would grow mobile customers by 29,000 in 2022, up from 13,000 in 2021. 

Also: Charter Falls Short of Broadband Subscriber Targets, Wireless Soars

Other analysts have revised their Charter estimates as well. In a January 3 report, Bernstein media analyst Peter Supino pointed to a possible industry-wide mobile deflation risk, and revised his expectation for Spectrum Mobile subscriber additions to 252,000 from 277,000 in Q4.  

The answer should come in the next few weeks. Comcast is scheduled to report Q4 results on January 27, with Charter reporting on January 28. Altice USA has not said yet when it plans to release Q4 results, but usually does so in early February.   

Cable operators have been aggressively pricing mobile service in the past year — Comcast dropped monthly pricing to $30 per month per line for four lines minimum in April — and have added device promotions and discounts for customers that switch service.

According to Cusick, Comcast’s Xfinity Mobile now offers up to $400 in device credits for any iPhone 13 users that switch — double its prior offer. Cable companies also have benefitted from their ability to bundle wireless service with broadband, which has had a big impact on wireless customer growth. 

Also: Analyst Says It’s Time to Take Cable's Wireless Seriously  

Cusick added that his estimates for Charter could be a bit low, given the operator’s aggressive discounting in October, dropping monthly charges for two lines or more to $29.99 from $45 per month. And Charter CEO Tom Rutledge has said he sees the wireless business as a huge catalyst for the future.

Back in December at the UBS conference, Rutledge did not offer any future subscriber growth guidance but said that going forward, the biggest growth driver for the business overall is mobile. 

And both Charter and Comcast have seen the benefits of bundling broadband and mobile, with efforts to pair the two more aggressively beginning last year.  

At the same time, the Big Three (AT&T, Verizon and T-Mobile) wireless players are beginning to see their subscriber dominance wane. AT&T, which Cusick expects to more than triple its wireless subscriber additions in 2021 to 3.19 million from 1.46 million in 2021 — largely due to aggressive device promotions — will see that growth dip to 2.35 million additions in 2022. He predicted that Verizon, which should nearly double its mobile additions in 2021 to 1.101 million from 667,000 in the prior year, will fall back to about 875,000 additions in 2022. T-Mobile, which is expected to add 2.917 million mobile customers in 2021 — up from 1.87 million in 2020, will add 2.4 million in 2022 according to Cusick. ■

Altice USA shares fell another 10% Friday as investors continued to rush for the exits after CEO Dexter Goei said the company would have to increase spending as Q3 broadband additions enter negative territory, causing some to call into question the company’s past aggressive cost-cutting strategy. 

Altice USA shares traded as low as $19.74 each on Friday morning (down 10.5%, or $2.32 per share), after a 12.7% decline on Thursday when Goei said at the virtual Goldman Sachs Communacopia conference that the company would lose between 15,000 and 20,000 broadband customers in the third quarter. The stock closed at $20.59 each on Sept. 24, down 6.7%, or $1.47 per share.  

“If perchance Altice USA CEO Dexter Goei MEANT to destroy his own stock yesterday, he could hardly have been more thorough,” wrote Bernstein media analyst Peter Supino in a note to clients Friday. “After stating that Altice would miss consensus broadband net additions for the third time in four quarters, Goei described a different operating and financial trajectory with less broadband ARPU growth, more operating expenses, more capital expenditure, and less share repurchase (maybe, probably, for now). This may have been the most thoroughly negative outlook we have ever heard.”

While operators have repeatedly warned that the COVID-fueled growth rates of 2020 will slow down in 2021, Goei’s comments hurt all the more because not only did they highlight that broadband performance not only could slow down but could turn negative, and that capital spending, on the decline as the focus of the cable business has shifted toward broadband, could rise. 

Also Read: Analysts Search for Meaning in Altice USA Leadership Change 

Goei didn’t say how much he expected expenditures to increase at the Goldman conference. Altice USA also is in a different situation than other operators because it is in the middle of a five-year fiber upgrade plan started in 2017. Already the company expects to pass about 1.5 million homes in its footprint with fiber by the end of the year, mostly in areas where it competes with Verizon’s Fios service. Whether it will extend that buildout to its renaming 1.5 million homes in the future remains to be seen. 

“Ultimately, we do believe that fiber is the technology, the winning technology going forward as opposed to improvements in DOCSIS technology," Goei said at the Communacopia conference, but he added that it is getting harder to find technicians that know how to build fiber networks.    

In a research note, Barclays media analyst Kannan Venkateshwar wrote that he believes Altice USA’s problems go beyond infrastructure. 

“We believe costs may have been cut too deeply in areas such as customer support and billing, which may need to be built back to match the footprint expansion,” the analyst wrote. “This is why the turnaround in operations may take a while to materialize.”

As far as its stock, Venkateshwar noted that Goei also said the company will slow its share repurchase program, a key component of its valuation. He added that Altice USA’s track record for multiple guidance cuts in the past two years and its inability to meet its short-term goals have threatened its credibility, which has also pressured the stock.

“Overall, we believe Altice USA is back to where it was at the time of its IPO with respect to gaining investor confidence,” he wrote. “It took management a couple of years of execution to gain investor attention post IPO, and in many ways, the company appears to be back in that cycle. Consequently, we do not see any good reason to recommend the stock.” 

Altice USA burst on the U.S. cable scene about six years ago, when it’s former parent Altice NV purchased Suddenlink Communications and Cablevision Systems in quick succession. Led by then chairman Patrick Drahi, an admirer of US cable legend John Malone, Altice USA believed it could squeeze profit out of what many said was a rapidly maturing industry by slashing expenses and imposing European-style cost discipline to the bloated U.S. cable business. 

While most analysts doubted that ability, Altice made good on that promise by removing $900 million in costs from its former Cablevision and Suddenlink businesses, later going public in 2017. But now, with its stock price falling sharply — it reached a new 52-week low Friday — some analysts are wondering if the company may be better off increasing its leverage to buy its remaining publicly traded shares, effectively abandoning the public markets altogether. 

At the Communacopia conference, Goei said that beefing up leverage is an option, but at least for the next three quarters, the focus will be on righting the ship. 

“We’ve got decisions whether we want to releverage the balance sheet at some point in time if we’re not getting rewarded for what we’re doing from an investments perspective, that we really believe in the medium-term results,” Goei said. “But I don't think that's a decision for us to make today.

“I think we’re focused, given the management changes, on making sure that all arrows are pointing in the right direction towards reinvesting in our business or accelerating our business, and that's what the focus is going to be over the next three quarters,” he continued. “Thereafter we can have discussions around what to do with our balance sheet, depending on how the market sees us.”

Also Read: Model Behavior

Goei said in part the Q3 loss was due to lower than expected gross adds and an “underwhelming”  back-to-school period And while some analysts noted the inherent seasonality of Q2 and Q3 in the cable business — typically that’s when customers move to summer homes and college students go off to school -- others weren’t buying it. 

“Explanations proffered by operators thus far for lower gross adds don’t really make much sense to us, especially given that telecom companies are actually seeing trends improve,” Venkateshwar wrote. “While some have blamed weaker back-to-school origination, most colleges in the U.S. are operating at close to full capacity and therefore it is not clear where this slowdown is coming from.”

Venkateshwar warned that “there are more shoes to drop,” pointing to eviction moratoriums expiring, fading unemployment insurance increases and the potential fallout from non-pay churn.

“[T]here is an unusual lack of visibility across cable industry unit growth trends, and given the fact that almost the entire residential revenue topline growth now depends on broadband relationships and the high proportion of fixed costs on the broadband side, valuation in the space could have more downside to reflect this uncertainty,” Venkateshwar wrote. 

Netflix could more than double its total subscriber additions in the second half of 2021 as its original content slate expands, while Q2 growth, fueled by children’s programming and international series, should be in line with guidance, according to Canaccord Genuity media analysts Maria Ripps and Michael Graham.

In a note to clients issued Wednesday (July 14), the analysts estimated that Netflix would report about 1.1 million customer additions in Q2, slightly above company guidance of about 1 million additions. But Ripps and Graham expect bigger gains in the second half of the year — about 14 million customer additions (more than twice the five million added in the first half of the year) — fueled by the return of several popular series and a slew of new originals.

Netflix is scheduled to report its Q2 results on July 20. 

Ripps and Graham expect Netflix to end 2021 with almost 223 million total paying subscribers, up 19.2 million from the prior year, but still behind the 36 million it added in 2020. In 2022, the analysts predict Netflix will have nearly 250 million global customers, up 26.6 million.

After a sluggish first half in 2021, Canaccord expects Netflix’s second half content lineup to have “significantly more firepower,” with the July return of series Atypical, Virgin River, Never Have I Ever, and one of its most popular shows of 2020, teen drama Outer Banks.    

Reality dating show Sexy Beasts debuts on July 21 and similarly themed reality hit Love Is Blind comes back a week later for a three-episode reunion. On the film side, the third installment of teen drama The Kissing Booth premieres on Aug. 11 followed by He’s All That (featuring the acting debut of Tik Tok star Addison Rae) on Aug. 27, and action comedy Red Notice, starring Dwayne “The Rock” Johnson, Gal Godot and Ryan Reynolds on Nov. 12. Lin-Manuel Miranda musical Tick, Tick … Boom!, season two of The Witcher, and Don’t Look Up are also slated for fourth quarter release.

New episodes of past hits after a COVID-induced hiatus should goose next year’s subscriber rolls even further, according to the analysts. 

“The content pipeline for 1H22 and beyond is also robust as COVID-driven production delays pushed out new seasons of some of the biggest titles like Stranger Things, The Crown and Ozark into next year, and Netflix continues to invest in unique content both in the U.S. and around the world which is helping to strengthen its competitive positioning and differentiate its library from those of rivals,” Ripps and  Graham wrote. 

Netflix has been shaking up its content mix of late, which is reflected in Canaccord’s own top 10 rankings. Animated children’s fare like The Mitchells vs. The Machines, Dog Gone Trouble and Wish Dragon have dominated Canaccord’s TV Power Rankings, while at the same time strengthening Netflix’s position against rival Disney Plus, the analysts wrote.

Original content is still a core growth engine for Netflix, and despite a lighter than usual slate in the past few months, about 64% of the SVOD service’s top ten shows in Canaccord’s power rankings were originals, compared to 63% in Q1 and 59% in Q4. 

As production for its tentpole titles was on hold, Netflix boosted its commitment to children’s content, licensing The Mitchells vs. The Machines from Sony Pictures, which stayed in the top ten rankings for each day of the quarter after rights were purchased. Kids movies also made up six of the top ten films in Canaccord’s power rankings  during the quarter, including Netflix-produced Dog Gone Trouble and Wish Dragon joining licensed fare like Home, Madagascar 3 and The Secret Life of Pets 2. 

Ripps and Graham expect that trend to continue, adding that Netflix already has a handful of kids series in the pipeline — A Tale Dark & Grimm and Dogs in Space slated for fall 2021 and Super Giant Robot Brothers expected in 2022.

Investments in local language content also are showing results across the board, with the popularity of series like Mexican mystery Who Killed Sara? placing second during the quarter in Canaccord Genuity’s TV Power Rankings and French thriller Lupin, Norwegian fantasy drama Ragnarok and Spanish teen drama Elite spending significant time in the top ten.

Netflix began producing local language series back in 2015 with the Colombian Cartel-themed Narcos, and followed that somewhat surprising hit with shows like Money Heist (Spain), Dark (Germany) and others. Now such shows are regular hits with viewers.

“...This segment of Netflix’s library serves not just as a tool to drive subscriber acquisition and engagement in international markets, but also as a key differentiating factor compared to other streaming services,” Ripps and Graham wrote. 

The analysts noted that Netflix plans to step up its already impressive local language output on several fronts.

In South Korea, where it has about 3.5 million subscribers, Netflix has invested about $700 million in two product facilities and local language content, and plans to spend another $500 million on movies and TV series produced in the country. The SVOD pioneer has spent about $420 million in India on content over the past two years and said that it plans to spend more than that on 41 new shows and movies it will release in 2021. 

Other countries will see similar investment. Netflix is opening a new office in Italy in the second half and plans to double the number of Italian original series next year; in the Nordic region, where it has 4.5 million subscribers, Netflix has already produced more than 70 original series and plans to open an office there in the second half of 2021. 

Netflix already has spent about $175 million producing shows in Colombia over seven years and plans 30 new projects before the end of the year. In Spain, where it has produced more than 50 titles and opened its first European production hub in Madrid in 2019, plans are to double the number of sound stages from five to 10 in addition to building new post-production facilities, a film lab and high-tech editing suites. In Russia, Netflix has announced plans to produce its first Russian original series — Anna K — a retelling of Tolstoy’s Anna Karenina, while in Mexico it plans a remake of hit comedy movie Nosotros Los Nobles.

Moody’s Investors Service raised its credit rating on Netflix Thursday to Ba1 -- one notch below investment grade -- adding that despite fears that lockdown-related customer growth could wane, the momentum should continue throughout the year.

Pandemic lockdowns helped push Netflix subscriber growth to record heights in 2020 -- fueled by a second half customer surge -- and that growth should continue as entertainment options remain limited, Moody’s senior VP Neil Begley said in his report. 

"The performance of Netflix in the second half of 2020 materially exceeded our forecasts at the time we placed a positive outlook on the ratings a year ago," Begley wrote. “These favorable developments are pulling forward the credit improvement trend by as much as another year and have resulted in a two-notch upgrade and maintaining a positive outlook.”

Also Read: Netflix Ups the Ante with Latest Deals 

The upgrade brings Netflix’s long-term credit rating one notch below investment grade, which would mean lower interest rates and better access to capital markets. Netflix has about $14 billion in long-term debt and has pledged to keep its leverage in the $10 billion to $15 billion range as it generates more cash.  

The SVOD pioneer added about 8.5 million U.S. and international subscribers in Q4 2020, far outpacing its own prediction of 6 million additions. For the full year, paid net subscriber additions were 37 million, a record for the company. Those increases came despite a price increase implemented in October that raised the cost of the most popular Netflix subscription from $12.99 to $13.99 per month. 

Netflix is scheduled to release its first quarter results on April 20. When it released Q4 results in January, the company issued guidance that it expected to add about 6 million customers worldwide in Q1.

Begley expects subscriber additions to remain volatile quarter-to-quarter as they have in the past, adding that a leaner content pipeline in the early months of the year could affect subscriber growth until production catches up. 

“But we also believe that the medium and longer-term outlook remains very favorable for the company as it continues to build on its significant scale to penetrate global addressable homes of over 1.5 billion, sustaining competitively low cost per viewing hour leadership, growing average revenue for members, and reinvesting in even more content as it benefits from this virtuous cycle,” Begley said.

Canaccord Genuity media and technology analyst Michael Graham expects Netflix to beat its third quarter subscriber growth expectations, adding that growth should continue into the fourth quarter despite plans for a November price increase.

Netflix said earlier this month it would increase the monthly price of its premium tier to $13.99 from $11.99 and for its standard plan to $10.99 from $9.99 beginning in November. Pricing for its $7.99 basic plan will remain the same.

In the past, price increases have spurred a flurry of hand wringing from analysts who predicted it would result in slower subscriber growth.  And in Q2 2016, after it had decided to “un-grandfather” earlier subscribers who had been paying between $7.99 and $8.99 monthly for standard service to the current $9.99 rate – subscriber growth was impacted. Netflix added 1.7 million subscribers in Q2 2016, short of the 2.5 million it expected.

But Wall Street and investors applauded the latest increase – Netflix stock rose about 5% on the day it said it would implement the new rate card. And analysts are encouraged that a strong content pipeline will offset any churn.

In a research report, Graham noted that a slate of fairly strong original releases in the quarter like Narcos and high profile returns in the latter part of Q2, like Orange is the New Black, should carry additions into Q3.

Graham estimates that Netflix will add 850,000 domestic subscribers in the quarter, 50,000 more than analysts’ consensus of 796,000 additions and 100,000 above the company’s own expectations of 749,000 additions. He believes that with the second season of 2016 surprise hit Stranger Things slated for the fourth quarter, should help push that growth ahead.

“We still believe there are enough draws this quarter to drive a domestic sub beat,” Graham wrote.

With Netflix slated to release its second-quarter results on July 17, analysts are already chiming in with their predictions, with two influential stock pickers expecting strong subscriber growth for the SVOD pioneer.

In separate reports this week, UBS Securities media analyst Doug Mitchelson and Morgan Stanley media maven Ben Swinburne wrote they expect Netflix’s domestic subscriber growth to rebound to 600,000 or more additions in Q2, a turnaround from the 162,000 additions in the same period last year.

Related: Netflix Ranks Among Top Four in ‘Must Keep TV’ Rankings

Last year’s Q2 was marred by what Netflix said were unfavorable press reports that focused on an expected price increase. Last year, Netflix “un-grandfathered” early subscribers, which raised charges for many long-time customers by $2 per month.

With that behind it, both Mitchelson and Swinburne expect a return to robust growth rates.

Related: Netflix Forecast to Hit 128M Subs by 2022

In his report, Mitchelson predicted Netflix would add 600,000 domestic and 2.6 million subscribers in the quarter, in line with company guidance. He added that he expected the momentum to continue into the seasonally strong third quarter, with domestic subscriber rolls increasing by 640,000 and international customers rising by 3.5 million.

“It’s still all about the subs,” Mitchelson wrote, adding that he was slightly concerned about a lighter original programming slate in the period – five new titles compared with 10 in the previous year.

Related: Live TV Viewing Falls in First Quarter: Nielsen

Swinburne was equally optimistic about subscriber growth – he estimated U.S. customers would rise by 600,000 and international subs by 2.6 million. He predicted Q3 U.S. additions would be 630,000 in Q3 and 3.25 million internationally.

In his note, Swinburne wrote that Netflix has doubled the book value of its content assets in less than two years to about $11 billion, more than that of traditional programmers like AMC, Viacom, Discovery and Scripps Networks combined. He noted that traditionally film and TV groups (including Time Warner) turn $1 of content book value into between $2 and $4 of revenue, compared to Netflix at $1 of revenue for every $1 of content book value.

“Our current estimates for revenue and content spend imply that the roughly 1:1 ratio for Netflix remains in the long-term, supporting a profitable and high return on net operating assets (RNOA) business,” Swinburne wrote. “However, these admittedly imperfect comps point to the potential for materially higher earnings power than the market appreciates today.”

Charter Communications continued cable’s streak of improved basic video customer growth, adding 12,000 customers in the third quarter, its first positive growth quarter since Q4 2014.

Charter also increased high-speed data customer additions, adding 131,000 in the period versus 94,000 additions in the same period last year. Telephony customer additions also increased to 37,000 in the quarter, compared to 29,000 additions in the prior year.

"Clearly, 2Q15 was not a negative inflection point for the industry, and this morning's results from Charter and Time Warner Cable validate this thesis of ours," analyst Vijay Jayant, of Evercore ISI, said in a note to investors. Pay TV operators struggled in the second quarter of this year, raising fears of a spiral of subscriber losses (see Kagan: Cord-Cutters Drive Pay TV Losses To 625K). Craig Moffett, of MoffettNathanson, commented in part: "It’s time to change the narrative about cord cutting."

Overall residential customer relationships grew by 97,000, with triple play sell-in improving year-over-year to 63% of total residential video sales, the company said. Residential primary service units (PSUs) increased by 180,000 versus a gain of 114,000 in the prior-year period.

The customer gains translated into improved financial results. Revenue in the period was up 7.2% to $2.45 billion and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 8.5% to $850 million.

“Our accelerating customer and PSU growth is being driven by our successful efforts to transform Charter into an organization that delivers outstanding products, service and customer value,“ CEO Tom Rutledge said in a statement. "Our operating strategy, which includes continued investment in superior products at attractive price points, with a highly-skilled US-based labor force, has accelerated our customer growth, leading to faster EBITDA growth and free cash flow generation. We look forward to applying the same strategy across our larger footprint, following the close of our Time Warner Cable and Bright House transactions, driving greater value for customers and shareholders.”      

As UP network — formerly the Gospel Music Channel — celebrated its 10th anniversary last week, network’s vice chairman Brad Siegel announced his plans to depart from the channel by year-end. Siegel spoke to Multichannel News programming editor R. Thomas Umstead about his decade-long run with the network and his future plans as well as his thoughts on an evolving cable industry. An edited transcript follows.

MCN: What was behind your decision to leave the network?

Brad Siegel: When I left Turner at the end of 2003, what I wanted to do was to build a network again. I’ve always liked startups and I wanted to build something from scratch and that’s what I did with Gospel Music Channel with 1,700 homes in Johnson, Tenn., 10 years ago. Now we’re in close to 70 million homes so it was a great ride.

From Gospel Music Channel to GMC: Uplifting Entertainment and now to UP, the mission has remained the same: to offer positive, family friendly entertainment. For me, we’ve done so much, so after 10 years I wanted to do something different. With my contract up at the end of the year, I approached Charley [Humbard, UP president and CEO] and said I’m really ready to move on and look for a new challenge. I have a few things in the works that I’ll announce in the near future.

MCN: What do you consider your legacy at UP?

BS: I’m proud of the fact that given our limited resources, we are in the middle of the pack out of 150 rated networks, even with our small marketing budgets and small original programming budgets, and I’m proud of building a place where people like to come to work to every day. There are a lot of networks and a lot of programming out there that people are not proud of, so I think that we built a place that’s a great place to work.

I’m also proud of the development of Aspire — it was a passion project for me along with Mr. [Earvin “Magic”] Johnson and then successfully [pitching] it to Comcast and being the first minority-owned network that Comcast launched as part of their commitment after they merged with NBC Universal. That was two years ago, and now the network is in 21 million homes and growing. It’s a brand that’s unique in the television landscape.

MCN: Your success with Gospel Music Channel/UP as an independently-owned network is rare in cable. How do you see today’s cable environment for launching a new independent channel?

BS: The environment of independent networks has only gotten worse. For independents and linear networks in general, you’re hard pressed to find a genre that’s really not represented on television. I think that the cost of competing in this environment today is so extraordinary, both for getting distribution and then getting ratings. Also, I don’t think we’ve ever seen the rate of change within the industry evolve as quickly as it’s moving now. The way people are consuming television has never changed at a rate faster than we are currently experiencing.

MCN: What would it take to launch a successful independent network today?

BS: You have to have a vision, a mission and a brand proposition that is clearly defined, and have a large and passionate target audience that understands and demands that brand. That to me is absolutely critical to succeed always, but more so in today’s cable environment.

MCN: Having said that would you entertain launching an independent television network in the future?

BS: No, not a startup. I definitely feel like I have another network or two in me and I’m looking at several other things and opportunities.