Netflix enjoys record first quarter ahead of Disney+ and price hike
James R | On 17, Apr 2019
Netflix enjoyed a record start to 2019, with over 9 million subscribers joining the service worldwide.
9.6 million net additions were counted in the first three months of the year, its highest ever recorded for a three-month period and up 16 per cent compared to the same period in 2018. 1.74 million of those were in the US, while 7.86 million were elsewhere around the world.
Revenue growth, however, was at 22 per cent from January to March, down from 40 per cent in the same period a year ago, which is when the streaming giant was enjoying a boost to income from several price rises in Q4 2017. Indeed, Netflix is once again looking to hike its prices this year, both in the USA and Mexico and Brazil, as well as some parts of Europe. That will significantly help to bolsters its coffers at a time when it’s increasingly investing in its own original content, and moving gradually away from licensing third party titles. As a result, it forecasts a slowdown in subscriber growth this summer, with Q2 2019 set to see 5 million net additions, down 8 per cent year-on-year.
The strategy, though, is a long-term one, with overall additions for the first six months o 2019 on course to be 7 per cent higher than the first half of 2018, with Netflix saying that figures are “tracking similarly to what we saw in Canada” when it increased prices last year and predicting a “modest” impact.
Netflix’s price hike comes as Netflix braces for competition from Disney+, Disney’s new subscription service, which is making a point of launching at a lower monthly price in the USA. Netflix, however, will be looking to see off competition with a strong slate of originals, including some of its biggest shows: Stranger Things Season 3 (July 4th), 13 Reasons Why Season 3, Orange is the New Black’s final season, The Crown Season 3 and La Casa de Papel (Money Heist) Season 3, plus big films such as Michael Bay’s Six Underground and Martin Scorsese’s The Irishman.
The latter underscores Netflix’s push into feature films and awards circles, with Netflix the joint second most nominated studio at the Oscars this year, with 3 wins for Alfonso Cuaron’s Roma. With no Netflix titles expected at Cannes, The Irishman is likely to launch at the Venice Film Festival, with Netflix no doubt aiming to replicate its approach for Roma.
Apple will also be launching Apple TV+ later this year, another direct-to-consumer subscription video service.
“Both companies are world class consumer brands and we’re excited to compete,” Netflix CEO Reed Hastings told investors in a letter today.
Hastings compared the boom in on-demand viewing to the way that US cable networks collectively grew for years as viewing shifted from broadcast networks during the 1980s and 1990s.
“Last quarter, we talked about how our streaming hours in the US (our most mature market) on TV still only represents roughly 10% of total TV usage,” he added. “We are much smaller and have even more room to grow in other countries and on other devices like mobile.”
One key area of Netflix’s growth is its international production, with Korean zombie show Kingdom becoming Netflix’s most successful season one show in Korea to date, with “millions of members outside of Korea” and “particularly strong viewing throughout Asia”. Localised remakes of its own shows, such as ¡Nailed It!: México, have also paid off: it achieved three times more first-month watchers in Mexico than the dubbed US version when it launched in February this year.
“The clear beneficiaries will be content creators and consumers who will reap the rewards of many companies vying to provide a great video experience for audiences,” added Hastings. “We don’t anticipate that these new entrants will materially affect our growth because the transition from linear to on demand entertainment is so massive and because of the differing nature of our content offerings.”