Netflix User Growth Analysis Lends Positive Expectations For Wednesday Earnings Report

For Netflix, Inc. NFLX investors, waiting for the year-end earnings report is a bit like waiting for the newest season of “Unbreakable Kimmy Schmidt.” After months of anticipation, they consume what’s released in a brief binge, enjoy a three-hour high and then immediately resume the slow-going marathon that is “Friends.”

The next Netflix rush is scheduled for Wednesday, when the company releases its fourth-quarter earnings. As of yet, investors have reason for optimism.

According to the research firm eMarketer, Netflix saw about 120 million service users in 2016 — a 10.2 percent growth over the 108.9 million users in 2015. These two annual figures represented 63.8 percent and 60 percent, respectively, of total over-the-top (OTT) video service users each year.

The market research firm expects Netflix to reach 128 million users — or 66 percent of total OTT users — in 2017. The numbers are expected to increase at a decelerated rate thereafter.

Market Peer Performance

Despite the slowing growth rate, Netflix is forecast to retain its No. 2 ranking for OTT video viewers among market competitors.

EMarketer reported contraction of the Hulu audience this year and predicts relatively slow growth through 2020.

Amazon.com, Inc. AMZN recorded growth at a much faster pace than any market competitor in 2016, with a 16.5-percent swell in OTT user volume. While the expansion rate will lessen the user gap between it and Netflix, Amazon is expected to entertain a maximum of 69 percent of Netflix’s users through 2020.

YouTube, as the oldest streaming service, still carries the largest viewership and boasts of positive room for expansion.

Despite the growing demand for OTT streaming, eMarketer expects adult video consumers to spend an average of four hours watching traditional television in 2017 while only spending an average of 1.2 hours on digital video consumption.