MUMBAI: Netflix has bounced back in its Q3 2019 financials by posting revenue of $5.245 billion, which was almost in line with analysts’ prediction of $5.25 billion and was up by 31 per cent y-o-y. While the expected earnings per share were $1.04, Netflix boosted that by delivering $1.47. This is almost double the 89 cents that it had delivered a year ago.
While the global subscriber addition was expected to be around 7 million, Netflix came in slightly short of that giving 6.8 million additions taking its total to 158.33 million. Average streaming paid memberships and ARPU grew 22 per cent and 9 per cent year-over-year, respectively.
In a statement to shareholders, Netflix said that the company was focused on expanding its non-English language original offerings to help penetrate international markets. The quarter saw the debut of Sacred Games S2 which Netflix said has become its most-watched show in India.
The company also spoke about how it is making it easier for people to sign up to Netflix, including the ambitious low-priced mobile plan in India in July. It said that it was pleased with the results. “Our approach with pricing is to grow revenue and so far, uptake and retention on our mobile plan in India has been better than our initial testing suggested. This will allow us to invest more in Indian content to further satisfy our members. While still only a very small percentage of our total subscriber base, we’re continuing to test mobile-only plans in other markets,” it said.
Netflix also admitted that while it had been competing with Amazon, YouTube and Hulu as well as linear TV for over a decade, upcoming services like Disney+, Apple TV+, HBO Max, and Peacock are also increased competition. But Netflix said, “While the new competitors have some great titles (especially catalogue titles), none have the variety, diversity and quality of new original programming that we are producing around the world. The launch of these new services will be noisy. 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.”
It also added, “In our view, the likely outcome from the launch of these new services will be to accelerate the shift from linear TV to on demand consumption of entertainment. Just like the evolution from broadcast TV to cable, these once-in-a-generation changes are very large and open up big, new opportunities for many players.”
Netflix said it has been preparing for this new wave of competition since 2012 when it began investing in originals and started international expansion aggressively. “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,” it mentioned.
“With so many firms now looking to provide premium video content to consumers, it’s a great time to be a creator of content. Amazing content can be expensive. We don’t shy away from taking bold swings if we think the business impact will also be amazing. We don’t close every deal we chase and we don’t chase every deal on the table. And while not all projects that we do pursue will work out, our large and growing subscription base helps enable us to try many approaches,” the company said.
For Q4, Netflix is expecting consolidated revenue to increase 30 per cent year over year with 9 per cent streaming ARPU growth. It has given a forecast of 7.6 million global paid net adds with 0.6 million in the US and 7 million for the international segment.
