M+E Connections

Despite the strong results that Netflix enjoyed in the fourth quarter (ended Dec. 31), the increased competition from streaming services including the new Disney Plus is having some impact, according to Netflix CFO Spencer Neumann.

“We have seen – and we talked about it in” the latest quarterly letter to shareholders – “some elevated churn in the U.S. from a combination of pricing and competition,” he said Jan. 21, during the company’s quarterly results webcast.

There will be a full quarter of that competition in the first quarter of 2020 after just a partial one in Q4 2019, he noted.

“We also anticipate that competition rolling out globally throughout the year, so we’re trying to be prudent, thinking about that impact throughout the business,”

Asked specifically if Netflix had seen any engagement change among viewers since the kid-focused Disney Plus streaming service launched, Neumann said: “We’re growing in Q4 including in the U.S., even with some of this noise from competitive launches.” He added: “Our per membership viewing grew, not just globally but in the U.S. through Q4 and continues, so that bodes well for our long-term opportunity.”

Disney Plus “has a lot of great catalog product” and it “primarily is going to take away from linear TV,” Netflix CEO Reed Hastings predicted. But he conceded that it also “takes away a little bit from us.” He noted that Disney Plus is “going to be a global service,” but went on to point out “we compete a lot for time with YouTube” also.

The company didn’t provide full-year guidance for 2020. But Neumann conceded that Q1 may be challenging. After all, “it’s comping off of the all-time biggest quarter we’ve ever had in Q1 of last year,” he pointed out.

Although the 8.8 million new paying member additions it had in Q4 topped what analysts had expected, the 7 million paid net additions it predicted for Q1 is weaker than some had expected.

“That’s still big growth,” Neumann said, noting: “We’ve only had four quarters in our history where we’ve grown more than 7 million” in paid net additions.

Netflix “had a strong finish to 2019, with Q4 revenue growing” 30.6% year over year to $5.5 billion, it said in the letter. Profit soared to $587 million and $1.30 a share from $134 million and 30 cents a share.

“During the quarter, we surpassed 100 million paid memberships outside of the U.S.,” it also noted in the letter. In Q4, average streaming paid memberships grew 21% year over year. Global streaming paid memberships grew 20% to 167.1 million after the company added 8.8 million new members, Netflix said.

During December, the company launched “The Witcher,” which it said is “tracking to be our biggest season one TV series ever.” Through its first four weeks of release, 76 million “member households chose to watch this action-packed fantasy,” he said.

The company, meanwhile, scored several Oscar nominations with films produced by the Netflix studio, including the Best Picture nominees “The Irishman” and “Marriage Story,” as well as “The Two Popes,” it said in the letter. Those films were “very popular with our members,” it said but didn’t supply viewership data for them. “Having launched our original film initiative just under five years ago, this is a proud achievement and a testament to the creative talent with whom we partner,” it said.