How Our Netflix Viewing May Be Leading It to 'World Dominance'

— -- Netflix has not only taken over one in three households with its old and new video offerings, but it's on the road to world domination, literally.

The company announced Wednesday it reached 40 million subscriptions in the United States at the end of March, or a third of the nearly 116 million households, according to the U.S. Census. The company already has reached nearly 50 percent of U.S. broadband subscribers. That's not including the 20 million subscribers it now has outside the United States

"Netflix has about 15 percent of Internet subscribers and they’re on the path to world dominance in the next two years, where they will essentially be in every country," said Michael Olson, a Piper Jaffray & Co. senior research analyst.

If the company reaches 60 percent of U.S. Internet subscribers by 2020 and 10 percent of the international market, Netflix will have 135 million subscribers total, according to Olson's estimates.

Neil Macker, analyst with Morningstar, said subscribers, who are no longer waiting to watch or record their favorite shows from their television sets, are logging those viewing hours for Netflix's original content and liking it. Netflix's management said original content is more efficient on a dollar-per-viewing-hour basis, and proprietary content generates more viewing hours, which drives retention, Macker notes.

But Netflix subscribers sure do like their old shows, especially globally. Macker notes that licensed content increased viewing hours, especially outside the United States.

"Even older series such as ‘Friends’ helped increase viewing hours to 10 billion in the quarter, up from 4 billion two years ago," Macker wrote in a research note this morning.

Netflix will do its best to keep customers happy, and avoid a purge like that of 2011. That's when the company lost 800,000 subscribers with news of a price hike and spinoff plans that collapsed.

Could that mean few changes? Many investors, after all, are more focused on Netflix's number of subscribers than the company's profitability and revenue, Olson said, which beat expectations anyway.

"I think there will be less marketing in the U.S., because awareness is so high and what it can offer," Olson said, adding that international marketing will increase.

Netflix is even outdoing itself, having added 4.9 million new members globally in its first quarter, outpacing its own forecast of 4.1 million, and the prior year's 4 million in the same period. While U.S. customers are fueling subscriptions now, the future lies with the company's global expansion, Olson said.

Netflix, based in Los Gatos, California, added New Zealand and Australia to its roster at the end of the quarter, which helped boost its numbers beyond Wall Street expectations, Olson said. And in the second-half of this year, Netflix will be available in Japan.

"There’s a lot of expense coming with this worldwide rollout, but there’s a lot of potential long-term growth for them," Olson said.

Macker writes that the popularity of two recent series – “Unbreakable Kimmy Schmidt” and Marvel's “Daredevil “ -- "bodes well for the ventures beyond drama such as 'House of Cards' and 'Orange Is the New Black.'

"The strong start for 'Daredevil' should help build interest for the other series focused on lesser-known characters.”