Netflix Posts 20 Percent Subscriber Growth Despite Increased Streaming Competition

Reed Hastings - Getty - H 2018
Ernesto S. Ruscio/Getty Images for Netflix

The streaming giant now has 167 million global members.

Netflix added nearly 8.8 million subscribers during the fourth quarter of 2019, a period when the company faced increased competition as new streaming entries from Disney and Apple entered the market. 

The streaming giant now has 167 million global members, up 20 percent from the same period last year. That includes 420,000 new subscribers in the U.S., where Netflix has the most market saturation, and 8.3 million new subscribers abroad. The region where Netflix saw the most growth during the period was in Europe, Middle East and Asia, where it added 3.13 million members. The company attributed the additions to its "broad slate of original programming and the worldwide adoption of streaming video." 

Analysts, as polled by FactSet, were expecting subscriber additions of 7.9 million — 623,000 in the U.S. and 7.2 million abroad. Netflix had forecast 7.6 million subscriber additions during the period driven by overseas growth. While it beat on its overall forecast, it had lower-than-anticipated subscribers additions in the U.S., where it had previously said it would add 600,000 members. 

The last year for Netflix has been characterized by an influx in competition from entertainment and tech stalwarts finally implementing their streaming strategies. Apple and Disney launched TV+ and Disney+, respectively, in November, and services from WarnerMedia and NBCUniversal are on their way. For now, most of that competition comes in the U.S., where Netflix already dominates the market, but it will expand globally over time. 

Netflix CEO Reed Hastings reiterated that he sees the launch of these services as "reinforcing the major trend of the transition from linear to streaming entertainment." He continued, "We have a big head start in streaming and will work to build on that by focusing on the same thing we have focused on for the past 22 years — pleasing members. We believe if we do that well, Netflix will continue to prosper. As an example, in Q4, despite the big debut of Disney+ and the launch of Apple TV+, our viewing per membership grew both globally and in the U.S. on a year-over-year basis, consistent with recent quarters."

Netflix expects to add 7 million subscribers during the first quarter of this year, down from additions of 9.6 million during the first quarter of 2019. Netflix said the lower guidance reflects in part "the continued, slightly elevated churn levels we are seeing in the U.S." — which are largely a result of increased streaming competition.

During the fourth quarter, the company brought in $5.5 billion in revenue and had earnings of $1.30 per share. 

As has become more commonplace for the once-secretive Netflix, the streamer disclosed some new statistics about the performance of some of its top shows during the period. The fantasy drama The Witcher had the biggest first-season launch for any TV series with 76 million households watching the show during its first four weeks on the service. Meanwhile, the third season of The Crown was seen by more than 21 member households during its first month of availability. 

On the film side, Netflix said Michael Bay's 6 Underground was viewed by 83 million members. 

The streamer also revealed that it has changed how it counts a viewer. Netflix's metrics, which are not verified by a third party and are not comparable to Nielsen's average total audience measurement, previously counted an account that watched 70 percent of an episode or film as a viewer. Now, it will count anyone who "chose to watch and did watch at least 2 minutes" of a title as a viewer. This is similar to how BBC iPlayer and YouTube count views. Per Netflix, it is "long enough to indicate the choice was intentional" but more accurately shows popularity than the 70 percent threshold, which may have negatively impacted longer projects.

Netflix said that viewership numbers are now about 35 percent higher on average than under the previous measurement system. For example, the documentary Our Planet had 45 million member household viewers under the new measurement system, compared with 33 million under the previous metric. 

As streaming competition heats up, some companies are pulling their popular library programming from Netflix. On Jan. 1, for example, Friends disappeared from the service in advance of the launch of HBO Max. But in a post-earnings Q&A, Netflix content chief Ted Sarandos said the impact has been "nothing that we've seen or can measure." He elaborated that it's common for "popular product" to come and go from the streamer and that it prompts subscribers "to find their next favorite show." 

Netflix shares were down slightly immediately following earnings during after-hours trading on the Nasdaq. Shares closed the day down less than 1 percent to $338.11.