Netflix added 8.84 million paid subscribers in the fourth quarter, including 7.31 million outside of the US. The total number of customers now amounts to 139 million. Expenses for original content went to EUR 3.78 billion for the quarter and EUR 13.0 billion for all of 2018. Netflix kept its margin expectations and showed it wants to make its own films just as successful as its own series. Revenues for the quarter rose by 27 percent, but profit fell due to sharply higher spending on marketing, R&D and interest. Cash outflow increased due to increased investments in original content.
Profit declines
Revenues advanced 27 percent to EUR 4.19 billion dollars. The contribution profit (gross profit after marketing) fell to EUR 723 million. The corresponding margin of 17.3 percent is the company’s lowest since Q1 2013. This was mainly due to sharply higher marketing expenses of EUR 730 million (17.4% of sales, the highest level since Q2 2015). R&D was 34 percent higher and interest expenses increased by 71 percent. Partly as a result, net profit dropped by 61 percent to USD 133 million.
Netflix maintained its guidance for an operating margin of 13 percent this year (2018: 10%). In Q4, the margin was considerably lower, at 5.2 percent.
Cash flow nears negative record
The operating cash flow reached a negative EUR 1.24 billion, mainly due to investments in content for the quarter of EUR 3.78 billion. For all of 2018, these investments amounted to EUR 13.0 billion. Capex went to EUR 70 million. The placement of two bond loans helped the company raise over EUR 2 billion. Finally, the cash position lifted by EUR 733 million to EUR 3.81 billion.
Netflix itself calculated free cash flow at minus EUR 1.32 billion, a negative record, from minus 524 million the year before. 
Units and guidance
These are the unit highlights and expectations for the first quarter of this year. 
1. Streaming VS 
Subscriber growth in Q4 amounted 1.53 million (expected: 1.50 million) to 57.7 million. For Q1 2019, Netflix expects to add 
1.60 million. 
Revenues Q4 lifted 22 percent to USD 2.00 billion, with a contribution margin of 29.6 percent against 30.9 percent the year before. The revenue forecast for Q1 2019 is EUR 2.06 billion, with a margin of 34.2 percent. 
2. Streaming international 
Subscriber growth in Q4 2018 went to 7.31 million (expected: 6.10 million) to 80.8 million. In Q1 2019, the company expects to add 7.30 million.·
Revenues Q4 2018 jumped 36 percent to EUR 2.11 billion, with a contribution margin of 3.9 percent against 2.5 percent the year before. Revenues of EUR 2.35 billion are expected for Q1 2019, with a margin of 9.8 percent. 
3. DVD-by-mail US 
This segment lost 121,000 customers, for a total of 2.71 million. 
Revenues decreased 19 percent to EUR 85.2 million. The contribution margin went went a bit higher, to 60.5 percent from 59.6 percent year-on-year.
Viewing figures
Netflix accounted in the US for 10 percent of the TV viewing time and less than 5 percent of the viewing time on the smartphone.
The Bird Box film reached 80 million views after four weeks.
The You (US) and Sex Education (UK) series reached 40 million views in 4 weeks.
The Spanish series Elita had 20 million views after 4 weeks.
Bodyguard (UK), Baby (Italy) and The Protector (Turkey) were at 10 million after 4 weeks.
Shareholder letter
Finally, a number of quotes from Netflix’s letter to shareholders, illustrating its Netflix's strategy:·
"... we are beginning to have our original movie offering mirror the success of our series offering." In other words, Netflix is not (anymore) just about series.·
"People love fiilm ... at home and in theaters", with which Netflix emphasizes the importance of the cinema and shows its desire to establish links with 'Hollywood'.·
"We compete with (and lose to) Fortnite more than HBO."·
"When YouTube went down globally for a few minutes in October, our viewings and signups spiked for that time."·
"Our focus is not on Disney+, Amazon or others, but on how we can improve our experience for our members."