Netflix Hits Its Numbers, Investors Go Nuts, Reed Hastings Tells Them to Chill Out

orange is the new black

Netflix’s Q3 numbers are what Wall Street was looking for: The company now has 31 million subscribers in the U.S., and another 9 million in the rest of the world. Investors, who either hate Netflix or love Netflix but never feel neutral about it, are pushing the stock up 10 percent to $390 – an all-time high.

Given that Netflix was trading in the $50s just a year ago and is basically the same company plus a few new original shows, it might be useful to have some perspective on the disconnect between the company and its stock.

So CEO Reed Hastings provides it, right at the end of his investor letter:

In calendar year 2003 we were the highest performing stock on Nasdaq. We had solid results compounded by momentum-investor-fueled euphoria. Some of the euphoria today feels like 2003.

Despite the huge swings in our stock price since our 2002 IPO ($8 to $3 to $39 to $8 to $300 to $55 to $330), we’ve continued to grow our membership every year fairly steadily. We do our best to ignore the volatility in our stock. The progress we’ve made over the last 10 years is stunning. We want to make the next 10 years even more remarkable.

(Hear that? That’s the sound of investors ignoring Hastings’ counsel.)

Okay: On to the company itself. As many of my colleagues have noted, Netflix now has more paying subscribers in the U.S. than Time Warner’s HBO – or at least the last numbers that HBO reported.

Unlike previous comparisons some of my colleagues have made between Netflix and, say, Comcast, this one is relevant, since Netflix and HBO are actual competitors who make roughly the same amount of money per paying subscriber. But as both Netflix and HBO have noted in the past, there is a high degree of overlap between HBO and Netflix subscribers: If you have one, you’re likely to have the other.

Meanwhile Netflix, which sort of suggested last quarter that its “Orange Is the New Black” show was doing really well, is much more explicit about it this time around.

The company specifically calls out the show as a great marketing device: “[G]reat press coverage and social buzz generated by” OITNB, as well as the company’s Emmy nominations, helped push up the company’s numbers in the U.S.

But at the same time, Netflix also argues that people spend most of their time on the service watching stuff that isn’t made just for Netflix.

Specifically, Netflix calls out shows like “Breaking Bad” and “The Walking Dead,” where it offers exclusive access to reruns; it says those kind of shows generate “a bigger percentage of overall Netflix viewing.” Which makes sense, because my hunch is Netflix spends more on those kind of shows (for now) than it does on its originals.

But that’s a pretty good summary of the Netflix strategy right now: Use its original shows, and the attention they generate, to help sell the service to new users, and use TV’s reruns to help keep them. Looks like it’s working pretty well, regardless of stock price.

Sunday’s Super Bowl Means Lena Dunham Today

girls super bowl

Attention, fans of Colin Kaepernick and Lena Dunham!*

Now you don’t have to fret on Sunday, when the Super Bowl and the newest episode of “Girls” were set to collide: A clever stunt from HBO will let you watch Dunham’s sitcom in advance, starting today.

HBO is letting subscribers watch the next episode of “Girls” right now, via its on-demand cable service and its HBO Go online service. And if negotiating either of those options is too much for you, the pay network will air the new episode Saturday night, a day before the show would normally run. The same goes for “Enlightened,” the Laura Dern sort-of-sitcom.

That’s a smart promotional move, which primarily highlights the benefits of HBO’s watch-when-you-like features. And it gives people like me a chance to write about “Girls,” which is a win-win-win.

But what about the plight of “Downton Abbey” fans, who face the same scheduling dilemma? Slightly less good news for them: They’ll also be able to watch Sunday’s show in advance, if they’ve paid up for an iTunes season pass.

*And yes, we’re assuming there’s someone who falls into that Venn diagram.

Unlike Netflix Subscribers, HBO Viewers Aren’t Binge Viewers

At the D: Dive Into Media conference over the last few days, we’ve heard a lot of executives discuss the big paradigm shift of binge-watching being brought about thanks to Netflix and DVRs. But not everyone loves to watch TV that way. According to HBO President and COO Eric Kessler, binge viewing is an edge case for its viewers.

“Only about 6 percent of our viewers binge-watch our shows,” Kessler said. Despite the large amount of content that is available through its various on-demand offerings and its HBO Go streaming service, he said HBO viewers really only binge watch in the lead-up to the launch of new seasons. For instance, the third season of Game of Thrones will premiere next month, and HBO viewers who might not have watched the show will catch up to become part of the conversation when it launches.

That’s key, as the company seeks to get more subscribers tuning in for various new series episodes, and talking about them. And, in fact, the social media aspect is one reason why HBO probably won’t follow the Netflix model and start releasing all of its serialized TV episodes all at once.

Kessler noted that HBO TV shows typically kill off major characters. Releasing all the episodes at once would not only lead to huge spoiler problems, but it also means that its shows wouldn’t benefit from the typical weekly watercooler conversation that occurs.

And that’s especially important, since the vast majority of HBO viewing still happens live. Kessler said that 80 percent of viewing happens on HBO live, with about 16 percent happening through cable VOD. Just 2-3 percent comes through HBO GO viewership. Until that changes, HBO will want to keep its viewers coming back week after week.