Netflix's growth slows as it braces for influx of competition

Dominic Rushe in New York

Updated 16 October 2019 at 5:00 pm

Profits rise but subscriber base expands more slowly than expected, while Apple, Disney and others prepare own services. Netflix’s growth continues to slow even as the streaming media company prepares for competition from a slew of cash-rich competitors. The company’s latest results cheered investors as profits rose sharply, to $665m from $403m for the same period last year. Shares rose over 5% in after hours trading. But despite the fact that the quarter saw the launch of the latest season of Stranger Things – watched by 63 million people – subscriber growth was lower than expected. Netflix added 517,000 domestic subscribers in the third quarter compared with the second quarter, less than the 800,000 it had forecast. Internationally, Netflix added 6.8 million subscribers, fewer than the 7 million it had forecast. The results are the last Netflix will release before it faces stiff new competition from some of the biggest, and most moneyed, names in tech and media. Apple and Disney will soon launch their own streaming services. NBCUniversal is launching Peacock and AT&T will offer a new streaming service, HBO Max, which will include Friends, once one of Netflix’s most popular shows, as well as Big Bang Theory and Dr Who. “We see a make or break quarter for Netflix,” analysts at Bank of America Merrill Lynch wrote in a recent note. Last quarter, Netflix announced it had lost US subscribers for the first time since it started its streaming service 12 years ago. The company added 2.7 million new subscribers worldwide, well below its guidance of 5 million new subscribers, and lost 130,000 subscribers in the US. The news hit hard and Netflix’s share price has fallen by about 20% since then. In its letter to shareholders, Netflix argued that coming competition will be good for Netflix. “Many are focused on the ‘streaming wars’, but we’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.” Netflix’s slowing growth began after it raised prices. All its competitors are launching lower cost services. But Mihir Haria-Shah, head of broadcast at behavioural planning agency Total Media, said it was too early to pick a winner. “It’s not until users have to actually start paying for the new streaming services that we’ll know how willing people are to sacrifice one for another,” said Haria-Shah.

Netflix’s growth continues to slow even as the streaming media company prepares for competition from a slew of cash-rich competitors.

The company’s latest results cheered investors as profits rose sharply, to $665m from $403m for the same period last year. Shares rose over 5% in after hours trading.

But despite the fact that the quarter saw the launch of the latest season of Stranger Things – watched by 63 million people – subscriber growth was lower than expected. Netflix added 517,000 domestic subscribers in the third quarter compared with the second quarter, less than the 800,000 it had forecast. Internationally, Netflix added 6.8 million subscribers, fewer than the 7 million it had forecast.

The results are the last Netflix will release before it faces stiff new competition from some of the biggest, and most moneyed, names in tech and media. Apple and Disney will soon launch their own streaming services. NBCUniversal is launching Peacock and AT&T will offer a new streaming service, HBO Max, which will include Friends, once one of Netflix’s most popular shows, as well as Big Bang Theory and Dr Who.

“We see a make or break quarter for Netflix,” analysts at Bank of America Merrill Lynch wrote in a recent note.

Last quarter, Netflix announced it had lost US subscribers for the first time since it started its streaming service 12 years ago. The company added 2.7 million new subscribers worldwide, well below its guidance of 5 million new subscribers, and lost 130,000 subscribers in the US. The news hit hard and Netflix’s share price has fallen by about 20% since then.

In its letter to shareholders, Netflix argued that coming competition will be good for Netflix. “Many are focused on the ‘streaming wars’, but we’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.”

Netflix’s slowing growth began after it raised prices. All its competitors are launching lower cost services. But Mihir Haria-Shah, head of broadcast at behavioural planning agency Total Media, said it was too early to pick a winner.

“It’s not until users have to actually start paying for the new streaming services that we’ll know how willing people are to sacrifice one for another,” said Haria-Shah.