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Although Netflix earnings have managed to beet the street expectations, the streaming giant faces headwinds with upcoming competition from Apple and Disney.
The online-streaming media powerhouse Netflix has given strong Q3 earnings numbers resulting in its stock price (309,25 USD, +8.02%) shooting northwards on Wednesday, October 16. Beating street expectations, Netflix reported a 31% jump in its year-over-year revenue which is currently at 45.24 billion.
Another impressive thing is its GAAP earning stands at $1.47 per share instead of analysts’ expectations of $1.05 per share. When it comes to growth in the subscriber-base, the U.S. figures are not much impressive but global subscriber-base sees an uptick. Netflix saw 500,000 net additions in the U.S. against the expected 800,000. While it has seen a 6.3 million net adds internationally against the expected 6.2 million adds.
This year so far, the U.S. subscriber growth looks partially week when compared to 2018’s growth in the same period. While Netflix has added 2.1 million subscribers domestically until now in 2019, it was around 4.1 million in the same period of 2018. In a letter to the investors, Netflix assumes the price hikes to be the reason behind these falling numbers. It wrote:
“Since our US price increase earlier this year, retention has not yet fully returned on a sustained basis to pre-price-change levels, which has led to slower US membership growth. On a member base of more than 60m, very small movements in churn can have a meaningful impact on paid net adds.”
However, the price hike has helped Netflix to grow its revenue. The streaming giant that its average revenue has surged 16.5% year-over-year in the United States.
Keeping the Q4 Expectations on a Humble Note
When it comes to project the Q4 2019 growth, Netflix takes a cautious approach. Based on the current movement, Netflix predicts 26.7 million net adds in Q4 2019 against 28.6 million net adds last year. The streaming giant said:
“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”.
Netflix is certainly aware of all the competition coming ahead from giants like Apple and Disney. However, at the same time, it is confident of its growth. “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,” wrote Netflix in its press release.
The company said that the ‘streaming wars’ are nothing new for them since they have been competing against streamers (Amazon, YouTube, Hulu) along with the linear TV for over a decade. While there are headwinds in the short-term, Netflix is confident of the long-term opportunities in the market.
“In our view, the likely outcome from the launch of these new services will be to accelerate the shift from linear TV to on-demand consumption of entertainment. Just like the evolution from broadcast TV to cable, these once-in-a-generation changes are very large and open up big, new opportunities for many players”, explained the streaming giant.