Netflix Adds 6.8 Million Subscribers as It Awaits ‘New Wave of Competition’

Streaming giant will spend $15 billion on original content this year

Netflix said 64 million households watched Stranger Things' third season within the first four weeks of its release.  
Netflix

In the last quarter before Netflix will have to stare down major competition from new streaming services like Disney+, the company reported a growing subscriber base in the U.S. and abroad but nonetheless told shareholders that upcoming rival services and other factors may eat into the company’s future net subscriber growth.

In the third quarter, Netflix added 6.8 million subscribers, for a total of 158.3 million globally. That’s a 21% increase from the same time last year but a slight miss from Netflix’s forecasted 7 million net additional subscribers in the quarter.

In the U.S., Netflix added 500,000 new subscribers in the third quarter—giving it 60.6 million U.S. subscribers—marking a turnaround from the second quarter in which the company reported it had lost 126,000 U.S. subscribers, but a slower growth rate since the company raised prices in the U.S. earlier this year.

In its letter to shareholders, Netflix continued to downplay its forthcoming competition but said it no longer expected to exceed the 28.6 million net subscribers it attracted in 2018 and instead expected to add only 26.7 million subscribers by year’s end.

“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.

New streaming services are setting their sights on Netflix and are vying for some of the company’s massive market share in the space. Apple TV+, Apple’s foray into streaming, is expected to premiere on Nov. 1, and Disney’s anticipated streaming service Disney+ is prepping for a Nov. 12 debut. NBCUniversal’s service Peacock and WarnerMedia’s HBO Max are planning to premiere in early 2020.

In addressing the impending wave of competition, Netflix tried to assuage investors by saying their launches will be “noisy” but will not ultimately cut into the company’s long-term growth.

“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,” the company said. “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 …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.”

On an earnings video call, Netflix CEO Reed Hastings said that while the back-to-back releases of Apple TV+ and Disney+ would mark a busy two weeks next month, “there is not a big change” in the market overall.

“Fundamentally, it’s more of the same,” Hastings said. “Disney is going to be a great competitor. Apple is just beginning, but they will probably have some great shows too.”

A core tenet of Netflix’s strategy is to invest heavily in original programming, which the company hopes will attract new subscribers, retain long-time customers and insulate the company against “the anticipated pullback of second run content from some studios,” the company said. Netflix plans to spend $15 billion on original content in 2019, including in international programming where Netflix’s subscriber growth rate is most pronounced.

“We’ve been preparing for this new wave of competition for a long time,” Netflix said. “It’s why we started investing in originals in 2012 and expanded aggressively ever since.”

Recommended articles