What's going on?

Netflix�s shares jumped almost 10% late on Monday, after it reported much higher subscriber growth (tweet this) in its recent quarter than Wall Street expected!

What does this mean?

Net subscriber additions (i.e. accounting for cancellations as well) hit 5.2 million in the second quarter versus its own forecast of 3.2 million � that�s 2 million more subscribers than expected!


Subscriber growth in the first half of 2017 was 21% higher than it was last year � and international growth has a lot to do with it, as almost 80% of the growth came from outside the US. Netflix attributed its better-than-expected growth to its �strong state of content�.

Why should I care?

For markets: Netflix still spends a lot to produce content � but with the stock shooting up, investors don�t seem to mind!

One of the biggest criticisms often heard about Netflix is that it burns through a lot of cash (over $600 million in its latest quarter, up from $250 million a year ago). Producing all that content is expensive! The hope is that Netflix will eventually achieve a big enough scale that it will earn far more from subscribers than it costs to produce content. But there will be a problem if, for whatever reason, its growth falters or if its subscribers don�t stick around.


The bigger picture: Netflix argues that competition in its industry is creating greater demand from consumers.

The argument is pretty simple: the more high-quality, on-demand content that�s created, the more hours of content people are willing to watch. For example, if you got into the habit of watching Netflix�s House of Cards on weeknights, you might choose to watch HBO�s Game of Thrones next (rather than, say, join a softball team). Therefore, Netflix and HBO are both winning because demand for content in general is increasing. If true, that symbiotic relationship is great for companies profiting from our new viewing habits.