Netflix Posts Record Quarterly Sub Growth; Lower Q2 Growth Projection

Netflix hit another home run in subscriber growth, adding record 9.6 million net additions in the first quarter, ended March 31 — up more than 16% from 8.26 million net additions in the previous-year period.

Netflix ended the period with 148.86 million paid subs, up 25.2% from 118.9 million subs in the previous-year period.

The subscription streaming video pioneer April 16 said it added 1.74 million domestic subs to 60.2 million, in addition to 7.86 million subs internationally to 88.6 million. The service had forecast subscriber growth of 1.6 million domestic and 7.3 million foreign.

Wedbush Securities media analyst (and Netflix bear) Michael Pachter had projected 1.5 million domestic subs; 7.3 million internationally.

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Netflix posted net income of $344 million on revenue of $4.5 billion. That compared to net income of $290 million and revenue of $3.7 billion during the previous-year period.

Notably, Netflix alluded to its recent price hikes in the U.S., Brazil, Mexico and parts of Europe having some effect in the current quarter. Indeed, the streamer is projecting 5 million new subs in the current second quarter (ending June 30) — about 1 million below Wall Street projections.

“The response in the U.S. so far is as we expected and is tracking similarly to what we saw in Canada following our Q4’18 increase, where our gross additions are unaffected, and we see some modest short-term churn effect as members consent to the price change,” CEO Reed Hastings and CFO Spence Neumann wrote in the shareholder letter.

The executives hailed recent OTT video announcements by Apple and Disney as “world class consumer brands,” adding that Netflix would be  “excited to compete.”

Hastings and Neumann said they don’t expect Apple TV+ and Disney+ to materially affect its growth because the ongoing transition from linear to on-demand video is “so massive” ​and because of the differing nature of Netflix’s content offerings​.

“We believe we’ll all continue to grow as we each invest more in content and improve our service and as consumers continue to migrate away from linear viewing [similar to how U.S. cable networks collectively grew for years as viewing shifted from broadcast networks during the 1980s and 1990s],” Hastings and Neumann wrote.

Netflix’s legacy by-mail disc rental service continues to generate significant  operating income. The oft-neglected (by management) business contributed $46.7 million in operating income on revenue of $80.6 million. That compared to operating income of $56.8 million and revenue of $98.7 million last year.

The service ended the period with more than 2.5 million disc subscribers, down from 3.1 million subs last year.

Netflix said new-release movie, Triple Frontier, ​starring Ben Affleck, has been watched by more than 52 million member households in its first four weeks on Netflix.

Ben Affleck in Netflix original movie, ‘Triple Frontier.’
Woody Harrelson and Kevin Costner in ‘The Highwaymen’.

The streamer said new-release movie, ​The Highwaymen, starring Kevin Costner and Woody Harrelson as two lawmen attempting to bring Bonnie and Clyde to justice, is on track to being watched by more than 40 million subscriber households in its first month.

Separately, Netflix said original documentary, FYRE: The Greatest Party That Never Happened​, has been watched by more than 20 million member households in its first month on Netflix.

Doc Our Planet​, filmed over four years in 50 countries, is tracking to be one of Netflix’s most successful global documentary series, with more than 25 million subscriber households projected to watch in the first month of release.

 

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