Netflix misses estimates for paid subscriber additions

Netflix misses estimates for paid subscriber additions

The Netflix logo is seen on their office in Hollywood, Los Angeles, California
The Netflix logo is seen on their office in Hollywood, Los Angeles, California, on Jul 16, 2018. (Photo: REUTERS/Lucy Nicholson)

NEW YORK: Netflix on Tuesday (Oct 20) posted the weakest subscriber gains in four years as streaming competition increased, pandemic restrictions eased and live sports returned to television.

The company added 2.2 million paid subscribers globally during the quarter that ended Sep 30, missing Wall Street's target of 3.4 million and its own forecast.

Earnings per share also landed below analyst expectations at US$1.74. The consensus forecast was US$2.14, according to IBES data from Refinitiv.

Shares of Netflix, one of the biggest gainers this year as people stayed home amid the pandemic, dropped nearly 6 per cent to US$494 in after-hours trading on Tuesday.

"Domestic subscribers were nearly flat, which highlights Netflix's saturation in the US," said Ross Benes, analyst with eMarketer. With domestic additions slowing, revenue growth will likely come from price increases, he said.

The company reported a blockbuster quarter at the start of worldwide coronavirus pandemic, adding 15.8 million paying customers from January through March.

Netflix had warned investors that a sudden surge in new sign-ups would fade in the latter half of the year as COVID-19 restrictions eased. Netflix forecast in the fourth quarter it would bring in 6 million new subscribers around the globe, short of the 6.51 million that analysts expected.

The streaming video pioneer is trying to win new customers and fend off competition as viewers embrace online entertainment. During the third quarter, Netflix released "Emily in Paris", "Enola Holmes" and "The Devil All the Time."

Netflix acknowledged that competition was increasing as studios across Hollywood from Walt Disney Co to AT&T Inc's WarnerMedia have restructured to compete more directly for video subscribers.

"Competition for consumers’ time and engagement remains vibrant," Netflix said in a letter to shareholders.

In recent months, major sports resumed play and nascent streaming services, including AT&T's HBO Max and Comcast Corp's Peacock, offered audiences new options.

Netflix said its results reflected the fact that it saw such a big surge in customers early in the year.

"We continue to view quarter-to-quarter fluctuations in paid net adds as not that meaningful in the context of the long run adoption of internet entertainment, which we believe is still early and should provide us with many years of strong future growth as we continue to improve our service," the company said.

Netflix said it expected to complete shooting over 150 productions by the end of the year and that it would release more original programming in each quarter of 2021 compared with 2020.

Revenue rose 22.7 per cent to US$6.44 billion in the third quarter, edging past estimates of US$6.38 billion.

Net income rose to US$790 million, or US$1.74 per share, in the quarter from US$665.2 million, or US$1.47 per share, a year earlier.

Source: Reuters

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