Over the years, Netflix has built a formidable business worth $125bn.In the past three months, it added 6.7million new subscribers, bringing its total user base to 153million worldwide. But the next three months will prove to be it’s most challenging yet. Soon, Netflix will be competing with Disney+, HBO Max and Apple+ – all companies with enormous brand recognition and a strong desire to take their own slice of streaming’s riches.
On Wednesday, Netflix wrote to investors to tell them that competition would be a good thing. The rising tide of streaming services would just tempt more people away from “linear TV”, as they term it, and into streaming services.
“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,” the company told investors.
Contrary to its expectations, Netflix Inc. missed its subscriber-growth target for the second consecutive quarter, raising questions about the streaming-video giant’s ability to fend off competition from traditional media companies who are entering the market with rival services.
Netflix’s quarterly report was the last one before two major competitors, Walt Disney Co. and Apple Inc., are to enter the streaming-video field with offerings that—even combined—cost less than Netflix’s most popular plan.
Moreover, Netflix’s subscriber retention continues to suffer from its decision earlier this year to raise prices, a move that led to slower-than-expected subscriber growth. However, the higher subscription fees did boost average revenue per subscriber by 16%, which will allow it to invest more to strengthen its value proposition.
Also, the growing competition has led Netflix to lose popular older shows. NBCUniversal, which owns “The Office,” is moving the show to its streaming service in 2021. “Friends,” which is owned by AT&T’s Warner Bros., is leaving Netflix for HBO Max next year. And Disney-owned shows currently on Netflix such as “Grey’s Anatomy” will move off the platform once contracts expire.
The future isn’t all grim though, Netflix remains the dominant streaming platform in the U.S. and abroad with 60.6 million U.S. subscribers and 97.7 million internationally. Netflix on Wednesday said third-quarter revenue rose 31% to $5.25 billion, in line with what analysts had expected. The company posted a profit of $665 million, or $1.47 a share, compared with $403 million, or 89 cents a share, a year earlier.
Netflix also touched on its content strategy as the streaming wars continue to heat up, saying it’s not afraid to take “bold swings” when necessary, but that it won’t “chase every deal on the table.” The company said its multi-billion-dollar content budget and robust subscriber base allow will it to pursue a variety of different projects.