missed its forecast for U.S. subscriber growth for the third straight quarter, but blew through its expectations for overseas expansion, a mixed performance that comes as the streaming giant faces heightened competition from a gaggle of rivals.The Los Gatos, Calif., company said Tuesday that it added 423,000 domestic subscribers in the fourth quarter, compared with its forecast of 600,000 additions. It also posted an increase of 8.3 million subscribers in overseas markets, more than the seven million the company was expecting. It now has 167 million subscribers world-wide, including 60.4 million in the U.S.Shares in Netflix were up 2.3% in after-hours trading on Tuesday.
The results underscore that Netflix has two very different stories to tell Wall Street at the moment. Its operations abroad look as promising as ever, without any sign of a significant competitive threat, while clouds are beginning to gather in the companys home market, where rivals are offering new services and chasing creative talent in Hollywood.
Walt Disney Co.
s Disney+ streaming platform went live with a $6.99 monthly service that offers a range of content including animated classics and the Star Wars and Pixar franchises. Disney said a day after the service began that it had signed up 10 million users, but the company has yet to provide updated results.
launched Apple TV+ the same month, offering consumers access for $4.99 a month. Netflixs standard plan costs $12.99 a month. Apple has a relatively small offering of original shows and doesnt possess the vast libraries of classic programming that Netflix and others have.
s NBCUniversal and
WarnerMedia plan to introduce their direct-to-consumer streaming services: Peacock and HBO Max, respectively.
On a call with investors and analysts, Netflix Chairman and Chief Executive
said the new competition wouldnt prompt significant strategy changes at the company. Weve had the same strategy for 20 years: Please our members and they help us grow, Mr. Hastings said.
Disney+, Mr. Hastings said, is likely to take just a little from us and pose a bigger threat to traditional television.
We compete very broadly for viewing…and our viewing on a per-member basis is up, he said.
In a letter to shareholders, Netflix attributed the company’s softness in the U.S. and Canada to the new competition, as well as to the effects of price increases being rolled out to its users.
The company said it has a big head start in streaming and believes it will continue to prosper, even in a tougher battleground. The growing number of streaming services, Netflix told shareholders, will harm traditional TV, not its own business.
Mr. Hastings also explained why Netflix doesnt want to introduce an advertising-supported version of its service. Theres not easy money there, he said, adding that the company would be hard-pressed to take ad business away from
Amazon.com Inc.,Facebook Inc.
He said Netflix wants to be the safe respite for its subscribers, with none of the controversy around exploiting users with advertising.
Netflixs Europe, Middle East and Africa segment powered the companys international growth, with 4.4 million subscriber additions and a 42% jump in revenue. The Latin America segment added 2.04 million users. The Asia region is growing the fastest, but it is also the smallestwith just 16 million paid subscribers.
Netflix reported a fourth-quarter profit of $586.9 million, or $1.30 a share, as a one-time tax adjustment bolstered the bottom line. Revenue rose 31% to $5.47 billion.
New content the company premiered during the quarter included The Irishman, a film about organized crime, and Marriage Story, a movie about the demise of a marriage. Each film received multiple Oscar nominations.
Netflix has begun to face questions about the sustainability of its growth, particularly in the U.S. The company lost domestic customers for the first time in nearly a decade in the second quarter of 2019, and narrowly missed its growth forecast the next period. Netflix has said price increases have damped growth to some extent as they roll out across the companys footprint, and has pointed to rising revenue per customer.
Still, Netflix has a huge lead over streaming rivals and is adding international customers at a rapid rate the rest of Hollywood envies. Wall Street has remained optimistic about Netflixs potential, with shares in the company rallying over the past several months after a skid last year.
Alongside the race for subscribers, Netflix is also battling new competitorsincluding some whose services have yet to be launchedto sign up talent and rights to key programming. Holding on to popular old shows is proving challenging. Friends ended its run on Netflix at the end of last year and will be available on HBO Max later this year, while Comcasts Peacock service will carry reruns of The Office starting in 2021. Other popular Netflix content, such as Greys Anatomy, is expected to roll off the service as contracts expire.
Netflixs chief content officer, said on the analyst call that the service hasnt experienced any negative impact from the loss of Friends, a situation-comedy.
Netflix did acquire streaming rights to Seinfeld when it leaves Hulu in 2021, and continues to bid aggressively for popular shows.
The company is investing heavily in original TV shows and movies, betting that such content will ultimately keep subscribers happy.
Among the original titles Netflix said performed well in the fourth quarter were The Witcher, the stalker drama You, The Crown and the cartoon Big Mouth.
The streaming wars might mean you have way more options when it comes to platforms and content for entertainment. But ultimately, paying for all those options is going to look a lot like the high prices you used to pay for your old-school cable package. Photo: Alexandra Cardinale
Netflix still discloses little viewing data for its content. In previous quarters, it provided the number of member households that watched 70% or more of a title. Now it is providing the number of member households that started watching a title and stuck with it for at least two minutes.
The company said it made the change because the 70% methodology favored shorter-form content. However, the new approach can also boost the numbers by 35%, the company said.
Using the new metric, Netflix said The Witcher had the biggest debut season of any series on the service, with 76 million members watching at least two minutes during the shows first month on the platform. The latest season of The Crown attracted 21 million member households in its first month of availability.
Netflix is estimating it will add seven million paid users in the first quarter, compared with 9.6 million a year earlier, in part because of the challenges in the U.S market.
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Corrections & Amplifications Netflix has 167 million subscribers world-wide. An earlier version of this article incorrectly stated the figure as 174 million in one instance. (Jan. 21)
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