Markets have a habit of rewarding greater transparency.
Just as Amazon.com's (AMZN) stock rose in 2015 after it began breaking out Amazon Web Services' (AWS) performance, and just as Alphabet's (GOOGL) stock rose in 2016 after it broke out the performance of its money-losing "Other Bets" segment, Netflix's (NFLX) stock is up about 4% today after it provided details about its international performance by region in an SEC filing.
Previously, Reed Hastings' firm only broke out its streaming subscriber and revenue figures into two segments: The U.S. and International (i.e., everything else). Now, as was promised in the company's Q3 shareholder letter, Netflix is breaking out those numbers, along with its average revenue per paid user (ARPU), for four regions: The U.S. and Canada; Europe, the Middle East and Africa (EMEA); Latin America; and Asia-Pacific.
Here are a few interesting details uncovered about Netflix's international operations thanks to its improved transparency.
1. Netflix Still Has Far More European Subs Than Asian Subs
Of the 97.7 million international paid subs Netflix had at the end of Q3, 47.4 million were in EMEA (up 40% annually), and just 14.5 million were in Asia-Pac (up 62%). With the lion's share of EMEA subs believed to be in Europe, Netflix international growth is for now still fueled far more by Europe than Asia.
The glass-half-empty way of looking at this is that Netflix, which is available in every country except for China, North Korea and Syria, still hasn't blown up in many of the big Asian markets it's targeting. The glass-half-full view? It has a ton of room to grow in these places, and (though it's off a relatively small base), 62% subscriber growth is nothing to scoff at.
2. ARPUs Are Lower Across the Board Outside of North America
Whereas Netflix had a Q3 North American ARPU of $13.08, it had ARPUs of $10.40, $8.63 and $9.29 in EMEA, Latin America and Asia-Pac, respectively. Though it's not a surprise that North America is the Netflix region with the highest ARPU, the gap between North America and other regions is a reminder that not all subs are of equal financial value.
Meanwhile, the fact that Netflix's Asia-Pac ARPU is higher than its Latin American ARPU could be a sign that a large portion of its Asian subs reside in developed markets such as Japan, South Korea and Taiwan. Going forward, the company's rollout of cheap mobile-only plans (the first such plans recently launched in India and Malaysia) could pressure ARPUs in various emerging markets, albeit while boosting subscriber growth.
3. In Both Good and Bad Ways, Latin America Has Recently Been an Outlier
Netflix's Latin American paid subs rose 25% annually in Q3 to 29.4 million, a figure equal to a little over a third of the region's broadband household count. Though not bad in absolute terms, Latin American growth is currently much slower than that in EMEA and Asia-Pac growth.
On the other hand, Netflix did see its Latin American ARPU grow 17% in constant currency with the help of recent price hikes (ARPU grew just 8% in dollars due to forex swings). By contrast, EMEA ARPU was up just 3% in constant currency and down 3% in dollars, while Asia-Pac ARPU was up 4% in constant currency and down 1% in dollars.
4. Netflix Has About 6.5 Million Canadian Paid Subs
With Netflix having previously reported that it had 60.6 million U.S. paid subs at the end of Q3, the company's disclosure that it had 67.1 million paid subs in the U.S. and Canada (up 7%) implies a Canadian paid subscriber base of about 6.5 million.
With Canada possessing a little over 14 million households as of 2016, Netflix's numbers imply a household penetration rate north of 45%, not counting password-borrowers. The company's U.S. household penetration rate is pretty similar.