On Wednesday, Netflix released its third quarter 2018
financial results. With better than expected
earnings per share and growth in international subscribers, the market reacted
positively to the numbers in after-hours trading. Somewhat disappointing was slower than
expected growth in the number of domestic subscribers. A year-over-year comparison of subscriber
numbers shows
|
Subscribers
|
3Q2018
|
3Q2019
|
% Change
|
|
Domestic
|
58.5M
|
60.6M
|
3.6
|
|
International
|
80.8M
|
97.7M
|
20.1
|
|
Total
|
139.3M
|
158.3M
|
13.6
|
In the domestic market, with a price increase from earlier
this year that elevated churn, increased competition from major media and
technology firms that are launching niche streaming platforms, and a maturing
market, Netflix will need to continue to spend heavily on original content ($15
billion in 2019) to hold onto its dominant market position. While Netflix feels that its breadth of
content is its competitive advantage, others (e.g. Disney, WarnerMedia, and NBCU
Peacock) could argue the same. And, while
competition for consumers’ time in watching entertainment is not a winner-take-all
enterprise, there are pocket-book constraints and consumers may choice to
subscribe to just a few options and may be more willing to unsubscribe at times
if the “must-watch” content is not there. Hence, acquiring and retaining subscribers
will be harder to do domestically. Thankfully,
Netflix has some room to run internationally.
And, its commitment to creating more programming in languages other than
English will give it a leg-up on these other competitors.
No comments:
Post a Comment