Netflix's boom in subscribers is a sign that the world is accepting internet TV, meaning without commercials and on-demand, said CEO Reed Hastings during an earnings call with investors.
"The basic demand is increasing as people get more comfortable and more aware of Internet television where you don't get the commercial interruptions, where you get to watch where and when you want," said Hastings.
Netflix reported $2.47 billion in revenue during Q4 2016, and earnings per share of 15 cents. The streaming giant wildly beat its original projections for subscriber additions, bringing in 7.05 million new customers compared to its Q3 estimate of 5.2 million. The majority of adds were from international viewers.
Even though some shows — like "Gilmore Girls" — started as traditional TV shows before moving to Netflix, a large part of the draw for new subscribers came from original shows. Almost half of the most searched for shows this year were Netflix originals, said Ted Sarandos, chief content officer. The company has 42 launches coming up, including Marvel's "Iron Fist" and Drew Barrymore's zombie comedy "Santa Clarita Diet."
In addition, executives said they expect even greater success going forward since many of their hit series are entering their second season and beyond this year, and would benefit from the shows' established popularity.
Investors brought up concerns over increasing costs. For fiscal 2017, Netflix said its free cash flow deficit will be about $2 billion in 2017, compared to $1.7 billion in 2016, which is because the company wants to own "more content and more content categories," said chief financial officer David Wells.