Netflix pinched by new US rivals, but says it can handle them
Netflix is projecting a gain of 7 million paid subscribers worldwide in the first quarter, short of the 7.82 million estimate. And it added just 550,000 customers in the US and Canada during the fourth quarter.Updated: Jan 22, 2020 06:55 IST
Netflix Inc. admitted that new rivals such as Apple Inc. and Walt Disney Co. have weighed on its already-sluggish US growth. But the streaming giant reassured investors it can handle the onslaught.
Netflix climbed as much as 4.3% in late trading after delivering generally upbeat fourth-quarter results, with overseas growth helping offset the slowdown at home. Though the company expects to add fewer subscribers in the current quarter than Wall Street projected, it said there’s “ample room for many services to grow.”
“We view our big long-term opportunity as big and unchanged,” Chief Executive Officer Reed Hastings said during a pretaped recap of earnings.
Netflix investors have been grappling with whether the company’s days of accelerating growth are over. And it’s only going to get tougher as new services from AT&T Inc. and Comcast Corp. vie for subscribers. AT&T’s HBO Max and Comcast’s Peacock are both coming online in the next few months.
But Netflix has remained confident that it can navigate the fast-changing TV landscape.
In posting the results Tuesday, Netflix said it’s working to pull out of a slump in its home market, where price increases and a growing array of options have made it harder to attract customers. Apple’s TV+ and the Disney+ platform both launched in the US during November, enticing consumers with lower-cost services.
Against that backdrop, Netflix posted its weakest year of domestic subscriber growth since it first broke out its online service from the company’s traditional DVD-by-mail business in 2011.
“We are working hard to improve our service to combat these factors,” it said in a letter to shareholders.
Netflix is projecting a gain of 7 million paid subscribers worldwide in the first quarter, short of the 7.82 million estimate. And it added just 550,000 customers in the US and Canada during the fourth quarter.
Staying the Course
The Los Gatos, California-based company argues that its strategy is still sound, and competition shouldn’t cause it to change course. It can point to its global growth in the latest quarter. Netflix added 8.76 million customers in the period, compared with forecasts of 7.65 million.
Earnings also handily beat estimates, lifted by a tax benefit. It posted earnings of $1.30 a share, compared with a projection of 30 cents.
Europe and Latin America have been the company’s engine in the past couple years, and continued to serve that role in the fourth quarter. Netflix added 4.4 million customers in Europe, bringing its overall total to almost 52 million, and another 2.04 million customers in Latin America.
The shares had dropped as much as 3% to $327.97 in extended trading, but then rebounded as investors took the disappointing forecast in stride. The company’s shares climbed 4.5% so far this year before the close.