Netflix holds its ground against new challengers Apple and Disney
Netflix is holding its ground in the streaming wars, passing its first big test since Apple and Disney launched rival services.
The company added 8.8 million worldwide subscribers during the fourth quarter of 2019, surpassing expectations at a time when it faces intense competition.
Netflix had said it expected to add 7.6 million subscribers, and analysts thought the service would fare even better. The increase is only slightly smaller than the 8.9 million subscribers the service added in the fourth quarter of 2018.
The company’s stock dropped some 2.5% immediately after the announcement in after-hours trading, likely due to a cautious forecast for the first quarter. But shares rebounded and later traded up more than 2%.
Netflix – a pioneer in producing streaming media and binge-worthy shows – now boasts more than 167 million subscribers worldwide, bolstered by a list of well-received films and dramas released late last year, such as fantasy show The Witcher and Oscar nominees The Irishman and Marriage Story.
The boost helps reaffirm the company’s strong standing in the increasingly crowded world of video streaming.
The fourth quarter was an important milestone for Netflix, as it marked its first head-to-head competition with Apple’s five dollars-per-month streaming service and Disney’s instantly popular seven dollars-a-month option.
Nevertheless, the road ahead is unlikely to be smooth for Netflix. NBC, HBO and startup Quibi are all planning to launch new streaming services soon.
Two major questions loom: How much are consumers willing to pay for each video streaming option? And how many will they pay for before reaching subscription fatigue?
Netflix chief executive Reed Hastings acknowledged the increased competition in a conference call following earnings, but said he believes the services are mostly capturing new viewers who are moving away from traditional TV watching.
“It takes away a little bit from us,” he said of the Disney+ launch. “But again, most of the growth in the future is coming out of linear TV.”
Netflix has one major advantage over competitors: it has been collecting data on the shows viewers crave for years.
“Netflix’s scale allows it to reach mass audiences, which makes it easier for them to create hits when compared to newcomers to the market,” EMarketer analyst Eric Haggstrom said.