Netflix (2019)

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  1. As we’ve stated, the free emails are pretty sporadic so don’t get used to it 😋

  2. If you haven’t already, read this [Netflix 2018] post first for more context.


Here are the updated numbers for Netflix.

2019 Total Subscribers

US: 60.62 million

Int'l: 106.05 million

Just look at the international subscriber growth! In 2012, US subscribers outnumbered international by a factor of 5, but now, there 46 million more international subscribers.

In the US, memberships have clearly become much more saturated than international. You can see that in the US, Netflix has added between 2-6 million subs vs. the accelerating net additions from international.

In the US, contribution margins are much more mature, which is why more contribution profit comes from the US, even with the smaller absolute number of subscribers.

As a note: Contribution margin = revenue - cost of revenue - associated marketing costs.

Below is a key chart. It's the US contribution profit as a percentage of overall operating income.

Netflix still makes 131% of its EBIT from the US, even though the international memberships outnumber the US by 46 million.

Note that EBIT and contribution profit are different in that EBIT includes all of the operating expenses (R&D + SG&A) instead of just the associated marketing costs.

One reason for this is the average revenue per user. The US ARPU is 36% higher than international.

Netflix has raised prices a few times. The current standard plan stands at $12.99/month right now.

As you can see below, Netflix’s overall ARPU's has decreased with the move to streaming and an increase in international subscribers. But now it is coming back due to the price increases.

Further, here's a look at the company's EBIT margins. Bonus points for guessing when they starting investing heavily in streaming. 😉

The improvement in international contribution margins is a huge piece of this.

Netflix's "moat" is having a low cost per subscriber. It has 167 million subscribers so it can maintain a lower cost structure on a per sub basis. This is why it will be difficult for any streaming service to knock the company off its perch as the leader. It has the biggest subscriber base so it can more easily spread its content costs. This results in a lower content spend per subscriber, which means it can spend more to acquire subscribers and the virtuous flywheel continues.

That’s the moat.

Plus, it is now actively monetizing the content through partnerships and licensing.


If you don’t just want the occasional freebies, consider becoming a premium subscriber!