Netflix Revs up Growth in the Streaming War

Netflix shares rallied Wednesday after its latest quarterly update showed robust subscriber growth and better-than-expected profits ahead of a major escalation in the streaming television war.

Netflix reported a net income of $665 million in the recently-ended quarter, jumping up from $403 million in the same period last year and topping most analyst forecasts.

The critically-acclaimed limited series Unbelievable has been watched by 32 million member households in its first 28 days pic.twitter.com/axZcCdYyGu

— Netflix (@netflix) October 16, 2019

Revenue and subscriber growth, however, came in just shy of market consensus. The California-based company saw revenue up 31 percent at $5.25 billion and added 6.8 million subscribers worldwide to reach a total of 158.3 million.

Netflix shares climbed more than nine percent after-market trades.

The company, whose recent hits include “Stranger Things” and “The Crown,” was upbeat on its ability to thrive even as powerful competitors such as Disney and Apple enter the streaming market.

“The launch of these new services will be noisy,” Netflix said in its quarterly letter to investors.

“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.”

Netflix Clouds Loom

But eMarketer analyst Eric Haggstrom said the latest report includes signs of trouble ahead for the streaming television market leader, which fell short of its subscriber targets.

“The fourth quarter represents a completely new ballgame for Netflix as Disney+ and Apple TV+ will compete not just for subscribers, but for hit shows as well,” Haggstrom said.

“The fact that Netflix has shown disappointing growth without the new competition present, is a negative omen for Netflix in 2020 and beyond.” The Walt Disney Company and Apple are both set to launch streaming rivals in November, with more services on the horizon.

AT&T’s WarnerMedia will launch its new Netflix rival “HBO Max” in early 2020 after reclaiming the rights to stream its popular television comedy “Friends.”

Netflix trimmed slightly its forecast for subscriber growth in the current quarter, saying it expected the count to be up 26.7 million at the end of this year but that its positive outlook for the future remained firm.

It cited factors including uncertainty regarding how well its slate of shows will attract new viewers; response to price changes, and forthcoming competition.

The rise in revenue also meant Netflix could invest to improve the service and make more original shows to battle competition in markets around the world.

“We have been moving increasingly to original content both because of the anticipated pullback of second-run content from some studios and because our original content is working in the form of member viewing and engagement,” Netflix said.

“We’re expanding our non-English language original offerings because they continue to help grow our penetration in international markets.”

Netflix’s original films released in the recently-ended quarter included “solid hits” such as “Secret Obsession” starring Brenda Song) and “Otherhood” directed by Cindy Chupack.

Netflix-backed films set for release this quarter include Martin Scorsese’s “The Irishman” with actors Robert De Niro, Al Pacino, and Joe Pesci, along with “Marriage Story” starring Scarlett Johansson and Adam Driver.

“Amazing content can be expensive,” Netflix said.

“We don’t shy away from taking bold swings if we think the business impact will also be amazing,” Netflix said it would spend about $15 billion in cash on content this year.