Netflix added just over half a million paid subscribers in the United States and 6.26 million elsewhere in the third quarter of 2019, taking its total to 158.33 million. The 6.77 million net additions were slightly lower than Netflix had forecast but it was still the largest increase so far for a third quarter and certainly better than the 2.70 million the previous quarter. With competition coming from Apple and Disney, the chief executive of Netflix insists that they are not competing so much with each other as with traditional television.
Having lost 130,000 subscribers in the United States the previous quarter, the number of net additions in the third quarter was almost half that for the same quarter a year previously. Elsewhere the net additions were up on the previous quarter and on the same quarter the year before.
The forecast for the fourth quarter, which will see competition from Apple and Disney, is for 0.6 million additional subscribers in the United States and 7.00 million elsewhere, compared to a total of 8.84 million in the fourth quarter of 2018.
Overall, Netflix expects to have gained 26.70 million paid subscribers in 2019, compared to 28.60 million in 2018, for a global total of 165.93 million.
Netflix says that from next quarter it will provide revenue and membership numbers by four regions: Asia Pacific; Europe Middle East and Africa; Latin America; and the United States and Canada. It will only provide forecast guidance globally.
Reed Hastings, the co-founder and chief executive of Netflix, was predictably optimistic when speaking with analysts.
“What we have to do is just really focus on the service quality, make us must-have,” he said. “I mean we’re incredibly low priced compared to cable. We’re winning more and more viewings. And we think we have a lot of room there.”
“We’ll just stay focused on just providing amazing value to our members in the U.S. and I think that gives us a real shot at continuing to grow net long-term net adds on an annual basis. But we’re going to be a little cautious on that guidance.”
He pointed out that while Disney+ and Apple TV+ are just entering the market, Netflix, Hulu, Amazon Prime and YouTube have been competing heavily for the last 12 years, including with linear television.
“All of us are competing with linear TV. We’re all relatively small to linear TV,” he said. He compared it to multiple cable networks over the last 30 years, “not really competing with each other fundamentally but competing with broadcast.”
He observed that there are about 2 billion active users of Facebook and 2 billion active users of YouTube. “We’re obviously a fraction of that,” he said. “So equilibrium is so far away from where we are today.”
Netflix says it is accounts for less than 10% of television screen time in the United States and much less than that in mobile screen time.
However, with a direct membership model, Netflix does not need to take further share of viewing but it needs to continue to provide value to its subscribers, which will require increasing investment in original programming. With subscriber growth rolling off in the United States, the bigger opportunity is global.