Netflix Ramps Up Global Subscribers, but Sees Slower Growth Ahead

Netflix said on Tuesday that it added millions of new subscribers globally last quarter as it prepared for a tough competitive landscape, but its outlook returned in early 2020. The global television streaming giant beat expectations in the fourth quarter with a profit of $ 587 million. As of 2019 revenue increased 31 per cent to $ 5.5 billion from a year earlier. Netflix expected more than 8.8 million subscribers to hit 16.7 million worldwide, but growth in North America was below forecast with 550,000 new members, including 420,000 in the United States.

The after-hours trading showed Netflix shares in a narrow range, which declined slightly and then rose about 2.2 per cent.

Netflix said it expects to add about seven million new subscribers in the first quarter of 2020, well below the level it had logged in the record-setting quarter a year earlier.

"We've seen some high churn in the US by a combination of pricing and competition," Chief Financial Officer Spence Newman said during an earnings interview.

"We hope to roll that competition out around the world, so we are trying to be judicious about the impact in the business as a whole."

Traditional TV in trouble?
The California-based company has lowered expectations for the current quarter, competing for audiences such as Apple TV +, Disney + and soon-to-be-launched rivals such as NBC's Peacock.

According to Netflix executives, with many media and tech companies wading into streaming services, a cultural shift from "linear" television consumption - such as through cable services - to streaming entertainment may be on the horizon.

Netflix chief executive Reed Hastings said in an earnings interview, "We've basically had the same strategy for over 20 years - please help us as our members and help them grow."

"In the next decade, we hope to use the best resources we have to do even better."

Netflix, whose hit original shows include "The Crown," and "Stranger Things", is strong in several global markets outside of its strong competition in the US, which has intensified its lineup of international shows.

EMarketer analyst Eric Hegstrom said Netflix "ended 2019 on a strong note with new subscriber additions above expectations" but faces challenges.

"Netflix will need to continue producing hit shows as Disney, Apple, HBO and others will launch and scale new services"

"Netflix's scale allows it to reach mass audiences, making it easier for them to make hits than newcomers to the market."

Hastings considered Disney + to be a greater threat to traditional cable television services than Netflix.

"Disney is going to be a global service fairly quickly, but there are many global services," said Hastings.

"We compete a lot to watch with YouTube, and watching per member is up - it's all coming from linear TV."

Netflix noted that this is changing the way the show's popularity is calculated. Previously, one had to watch 70 per cent or more of a film or television show to be seen in a home.

Netflix said in a letter released with earnings figures that under the new methodology, a show would need to play for at least two minutes to watch, which was said to be "long enough to indicate intentional choice".

"Given that we now have titles with widely varying lengths - we believe that reporting families who see a title based on 70 per cent of a series or the entire film, which we are doing, Makes little sense, "Netflix said.

According to Netflix, the new method is similar to the way YouTube views, and viewership is up about 35 per cent.

No ads planned

 Hastings strongly stated that Netflix has no plans to get into the online advertising business, adding that the company is not interested in a fight with Amazon, Facebook and Google in that market.

"We're really focused on making our members happy," said Hastings.

"We want safe relief where you can enjoy, get excited, have fun and relax with any controversy surrounding the exploitation of users with advertising."