Netflix fell 300,000 subscriptions short of its forecast in the US market and 200,000 short in global additions in the last quarter, missing growth targets for the second quarter in a row, according to Q3 results released overnight.
The company has downgraded its forecast for total subscriber adds in 2019 by nearly 2 million from what it had predicted at the start of the year.
It is Netflix’s final quarterly results before Apple and Disney enter the streaming market, bringing with them competition which has been sorely missing in the video streaming market so far.
The streaming incumbent is still adding millions of subscribers overall though – another 6.8 million signed up in Q3 in total, including 517,000 US subscribers. Netflix had a rare US subscriber net loss in Q2 this year after hiking its monthly fees.
The price hike is still leading to slightly increased churn rates, Netflix says, but overall ARPU is up 16 per cent. The company says the increased revenue will be invested to “strengthen [its] value proposition”.
Netflix revealed 64 million households watched Stranger Things season 3 in its first four weeks and likely helped offset last years subscriber loss.
In Q3 Netflix revenue grew to $US 5.2 billion, a 31 per cent year on year growth, and operating income is now at $US 1 billion.
Starting next year, Netflix will combine its US subscriber figures with Canada (currently a 90/10 split) for reporting and will only issue subscriber guidance for global figures. Netflix says the change is because that’s “how we think about our business” and US vs international reporting “is becoming less useful internally”.
Last year, Netflix dismissed potential competition from Disney as being no more of a threat than long time rival Hulu.
However, the company’s latest comments show at least more acknowledgment of the threat of Disney, which revealed it will offer content from Disney, Pixar, Marvel, Star Wars and National Geographic for $A 8.99 per month, one dollar less than Netflix’s basic package.
In its latest quarterly results Netflix said, “The upcoming arrival of services like Disney+, Apple TV+, HBO Max, and Peacock is increased competition, but we are all small compared to linear TV.
“While the new competitors have some great titles (especially catalogue titles), none have the variety, diversity and quality of new original programming that we are producing around the world.”
Netflix says the launch of competitors’ streaming services will be “noisy” but ultimately there are enough eyeballs to go around as consumers transition from linear TV and cable subscriptions.
“There may be some modest headwind to our near-term growth, and we have tried to factor that into our guidance. In the long-term, though, we expect we’ll continue to grow nicely given the strength of our service and the large market opportunity.”