May 28, 2024 International Trending News Stories

Netflix gains new customers – but the major streaming attack is imminent

Reliable financial statements, uncertain outlook: The streaming market leader Netflix did surprisingly well in the fourth quarter thanks to series and movie hits such as “The Witcher” and “The Irishman.” But in 2020, the top dog must fear the competition from Walt Disney and Apple.
But the big challenge is only just beginning with the attack by financially secure rivals such as Hollywood giant Walt Disney or iPhone giant Apple. The intense competition is already making itself felt on the US home market – suddenly, a whole series of new rivals are chasing Netflix.

In the letter to the shareholders, Netflix shows itself to be combative. “We have a big lead in streaming, and we will build on that by focusing on what we have been focusing on for the last 22 years – satisfying our customers”. However, CFO Spencer Neumann admitted during a conference call after the presentation of the balance sheet that there had already been a slightly increased churn rate of customers due to Netflix’s intensified competition and comparatively high prices.

Netflix gains new customers and exceeds expectations

Overall, however, business is still running very smoothly: In the final quarter, Netflix attracted a surprisingly large number of new customers. The number of paid subscriptions rose by 8.8 million worldwide in the three months to the end of December, as the online video service announced on Tuesday after the US stock market closed. Netflix thus exceeded its forecast and also market expectations. By the end of 2019, the company had a good 167 million paid memberships.

However, Netflix is still struggling in the US home market, where Disney and Apple have recently launched streaming services. Here, only 423,000 subscription customers were added in the fourth quarter. This was significantly less than expected, which briefly depressed the share price in the post-trading period, even though the share price quickly turned positive again. All in all, Netflix on Wall Street has not been a high-flyer for quite some time now – last year’s US stock market rally passed the streaming king from Los Gatos in California by.

Netflix prepares for weaker times

The outlook for the current quarter makes it clear that Netflix is preparing for periods of weaker growth. The company is forecasting global growth of seven million customers – significantly less than analysts had expected. By comparison, 8.9 million new subscribers were added in the first quarter of 2019. The problem: The US market is now relatively saturated. Also, new competitors such as Disney, Apple, Viacom, and Comcast, as well as established rivals such as Amazon and Hulu Netflix, are undercutting Netflix prices with their streaming services – in some cases considerably.

But nobody should underestimate the market leader. Thus, profit and sales in the final quarter surprised positively. Netflix achieved a surplus of 587 million dollars (530 million euros), whereas the company had earned only 134 million in the corresponding period of the previous year. Revenues grew to 5.5 billion dollars – a significant increase of 31 percent year-on-year. The company, which once set new standards in online TV with series such as “House of Cards,” still sets the pace often enough with its content.

Just last week, 24 Netflix productions received Oscar nominations, meaning that the streaming service outperformed all other studios. Last year, Netflix had already made it into the prestigious “Best Film” category for the first time with the black and white film “Roma” by Mexican Alfonso Cuarón. This year the company has double chances in this coveted category with “The Irishman” and “Marriage Story.”

But to keep the competition at bay, Netflix also digs deep into its pockets. Last year, the company spent a production budget of 15 billion dollars, and by 2020, even more could be spent. But even with all that money, not everything can be bought. Netflix has lost the rights to two of its most popular shows – “Friends” will run on its arch-rival HBO and “The Office” will run on the new Comcast service Peacock from 2021.

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