Netflix Subscribers Continue to Grow
Netflix kept adding new paying subscribers in the third quarter but issued a soft forecast on Wednesday as it faces new competition from Walt Disney and other companies in the streaming video wars.
In Q3, Netflix said it grew to $5.2 billion in revenue, up 31% over the prior year, and operating income doubled to$1.0 billion. Paid net adds totaled 6.8m compared to our 7.0m forecast and prior year Q3 of 6.1m.
In the US, paid net adds totaled 0.5m in Q3 vs. the company's 0.8m forecast, and year to date paid net adds are 2.1m vs. 4.1m in the first nine months of 2018.
International paid net additions totaled 6.3m in Q3, a 23% increase vs. 5.1m in the year ago quarter, and slightly above the company's 6.2m guidance forecast.
For Q4, Netflix is expecting consolidated revenue to increase 30% year over year with 9% streaming ARPU growth. The company is forecasting 7.6m global paid net adds (vs. 8.8m last Q4), with 0.6m in the US and 7.0m for the international segment.
"While we had previously expected 2019 paid net adds to be up year over year, our current forecast reflects several factors including less precision in our ability to forecast the impact of our Q4 content slate, which consists of several new big IP launches (as opposed to returning seasons), the minor elevated churn in response to some price changes, and new forthcoming competition," the company said.
Netflix will face new competition starting in November from Disney+, a streaming service stocked with movies and TV shows from Disney’s Marvel, “Star Wars,” animation and other properties.
Apple also will debut a much smaller streaming video service with original programming in November. AT&T Inc’s HBO Max, and a new offering from Comcast Corp, are expected to enter the market next year.
"Many are focused on the “streaming wars,” butwe’ve been competing with streamers (Amazon, YouTube, Hulu) as well as linear TV for over a decade. 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 catalog titles), none have the variety, diversity and quality of new original programming that we are producing around the world. The launch of these new services will be noisy. 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," Netflix said.