Despite Stumble, Disney+ is the Top-Growing Streaming Service, JustWatch Says

While the fourth-quarter (ended Oct. 2) subscriber growth slowdown at Disney+ made headlines, the 2-year-old SVOD service remains the top-growing platform — ahead of competitors HBO Max, NBCUniversal’s Peacock, Paramount+, Hulu, Amazon Prime Video and Netflix.

New data from JustWatch, which tracks more than 20 million users per month across 54 countries, found that Disney+ was No. 1 in subscriber growth across the majority of its 64 operating markets. The platform ended the quarter with 118.1 million subs, up 60% from the previous-year period, but still trailing SVOD leader Netflix’s 214 million subs across 190 countries.

Indeed, Disney’s addition of 4.4 million subs in the most-recent fiscal period rivaled Netflix. But the streamer’s Indian asset, Hotstar, lost 2.4 million subs, largely due to the process of initiating subscriber renewals and the timing of the Indian Premier League cricket season. India accounts for 37% of Disney+ total subscribers.

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With Disney+ celebrating its two-year anniversary Nov. 12 in a companywide media event, CEO Bob Chapek is hardly worrying about the Q4 slowdown, reiterating the company is not focused on quarter-by-quarter subscriber results.

Instead, Chapek reminded that the service is now available throughout Japan and launching tomorrow in South Korea and Taiwan, with Hong Kong bowing on Nov. 16. In 2022, Disney+ will expand across more than 50 additional countries, including in Central and Eastern Europe, the Middle East and South Africa.

“Our goal is to more than double the number of countries we are currently in to over 160 by fiscal-year ’23,” Chapek said. “We are enormously proud of all that we’ve accomplished with the service in just the first 2 years. It has exceeded our wildest expectations, and we are so excited for what’s to come.”

Disney+ Sub Growth Cools, Just 2 Million Subs Added in Q4

Disney Nov. 10 disclosed that its Disney+ subscription streaming video platform added just 2 million subscribers in the fourth quarter (ended Oct. 2). The platform ended the fiscal year with 118.1 million subs, which was up 60% from 73.7 million subs in the previous-year period.

The subscriber growth slowdown was expected after CEO Bob Chapek in September warned the service would face challenges getting existing Indian subs to renew without the presence of Indian Premier League professional cricket, among other challenges. India represents 37% of all Disney+ subs following Disney’s acquisition of the Hotstar streaming platform from Fox.

Indeed, Hotstar lost about 2.5 million subs in the quarter. The overall sub gain was less than half of the 4.4 million global subs Netflix added during the same time period.

Disney ended the fiscal year with 179 million subscribers when including ESPN+ (17.1 million), Hulu and online TV platform Hulu + Live TV (43.1 million).

“In the past fiscal year alone, we have grown [direct-to-consumer] portfolio by 48%,” Chapek said on the fiscal call, adding that Disney remains focused on the long-term goals for the DTC segment versus quarter-by-quarter metrics. The strategy helps Disney avoid focusing on the Q4 Disney+ sub growth decline.

Chapek expects Disney+ sub growth to grow significantly in Q3  and Q4 next year as the service is made available in 160 countries, and the platform debuts myriad new movies and episodic programming.

“We’re confident we are on the right trajectory to achieve the guidance [230 million to 260 million Disney+ subs by 2024] we disclosed at last year’s investor day,” he said, including the platform achieving profitability.

Netflix Bear Analyst Eyes 15 Million Q2 Subscriber Growth

Wedbush Securities media analyst Michael Pachter has long rebuffed conventional wisdom when it comes to Netflix. The Los Angeles-based analyst steadfastly considers the streaming behemoth’s excessive use of free cash an underling weakness in the Netflix story.

Free cash flow is often considered an important measurement since it outlines how effective a company is at generating enough cash after funding operations and capital expenditures to pay investors via dividends and share buybacks.

Netflix has consistently been in the red with available free cash, with Pachter projecting $1 billion negative FCF for the SVOD pioneer in the 2020 fiscal year.

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But following a July 10-12 survey panel of 1,315 Americans on their current streaming and cable subscriptions, Pachter contends Netflix’s FCF situation is improving — albeit in the short term.

Michael Pachter

The analyst found that 50% of respondents cite Netflix as their favorite service, with 8% signing up for the first time in the past 90 days — a similar percentage of newbies resisted in Pachter’s previous survey in March.

“[It] suggests continued robust subscription growth,” Pachter wrote in a July 14 note.

Indeed, the analyst believes Netflix could report net sub additions of 15 million worldwide — up from Pachter’s estimated 7.9 million net sub additions. More importantly, the outsized sub growth could see a $250 million lift to FCF for the year.

“This would improve our estimated [Netflix FCF] loss of $1 billion (in-line with guidance for a $1 billion loss or better) to $750 million,” Pachter wrote, who added the improved economics portend other issues.

“We think the likely giant spike in new subscribers increases pressure on Netflix for retention.,” he wrote. “More consumption of content suggests even greater need to replace content with something new, and we expect spending and negative free cash flow to return to 2019 levels in 2021.”

Netflix reports second-quarter fiscal results July 16.

Netflix Q1 Results: Day of Reckoning or Rich Get Richer?

All eyes on Wall Street next week will be focused on Netflix’s first-quarter financial results, which will be released at market close on April 21. At a time of uncertainty, Netflix’s subscriber growth will either validate the market’s enhanced fawning over the SVOD behemoth’s stock or bring it crashing down to earth, the harsh economic reality of the coronavirus even on the perceived virus-proof over-the-top video ecosystem.

Wall Street analysts project Netflix will add upwards of nine million subscribers worldwide, significantly more than the streaming pioneer’s seven million estimate. Scuttlebutt suggests that with shelter-in-place mandates legally enforceable throughout much of Western Europe, people have turned to video streaming in greater numbers for entertainment than before the pandemic.

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Netflix shrewdly took the opportunity to bow true-crime documentary “Tiger King,” an immediate hit with social media water cooler banter, while boasting catalog can’t misses such as “The Office,” among others. The result: a spike in subscriber growth, according to streaming analytics firm Antenna.

“We believe the unfortunate COVID-19 situation is cementing Netflix’s global dominance, partly driven by the incremental content spend that is enabled by their massive and growing subscriber base,” Jeffrey Wlodarczak, analyst with Pivotal Research, wrote in a separate note.

Netflix ended 2019 with 167 million paid subscribers.

Indeed, the echo chamber reverberated surrounding Netflix’s strong position during the pandemic, to point the service’s stock topped Disney, among other media giants.

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Even longtime Netflix bear Michael Pachter, with Wedbush Securities in Los Angeles, expects “moderate upside” to subscriber growth and revenue as social distancing guidelines around the world have “clearly driven” streaming usage, dampened churn and drove incremental sign-ups.

That said, Pachter cautioned that the “most meaningful” stay-at-home mandates globally only began in late February through mid March.

“The timing of COVID-19-related usage and sign-ups late in the quarter, combined with an existing high degree of penetration for Netflix’s domestic addressable market, suggests relatively tempered upside in our view,” Pachter wrote in a note.

Netflix Projected to Top Q1 Subscriber Growth Estimate

Netflix reports first-quarter (ended March 31) financial results on April 21, and its subscriber growth during the ongoing coronavirus pandemic is expected to exceed the SVOD pioneer’s own estimates.

That, according to new data from Wall Street firm Sun Trust Robinson Humphrey. The firm says a combination of strong content (i.e. current hit “Tiger King”) and worldwide global appeal/deference to localized content should push total sub growth upwards of 9.5 million compared to Netflix’s projection of 7 million subs.

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Netflix ended 2019 with 167 million subs worldwide, including 67 million in North America.

Not surprisingly, Sun Trust Robinson Humphrey has a “buy” rating on Netflix’s stock, which is up 2.9% in early April 6 trading.

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Netflix Just Misses Q3 Subscriber Growth Estimates; Shares Up Regardless

Netflix Oct. 16 said it added 6.77 million subscribers in the third quarter (ended Sept. 30). The tally was 230,000 fewer than the subscription streaming video pioneer had projected — but up 700,000 subs from the previous-year period.

In the U.S., paid net sub adds totaled 500,000, down from 800,000 forecast and 998,000 a year earlier. It ended the period with 60.6 million domestic subs compared to 56.9 million in the previous-year period.

The SVOD behemoth has added 2.1 million domestic subs through nine months of the fiscal year compared with 4.1 million in the first nine months of 2018.

Netflix ended the fiscal period with 158.33 million subs worldwide compared to 130.42 million subs during the previous-year period.

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In the shareholder letter, CEO Reed Hastings and CFO Spencer Neumann tried sugarcoating the sub growth miss as a result of management’s desire to “strive for accuracy” in fiscal disclosures.

“In Q3, our guidance forecast was our most accurate in recent history,” they wrote.

Netflix cited the recent domestic price hike for undermining sub retention from pre-price-change levels in the U.S.

The Los Gatos, Calif.-based service has revised downward global Q4 sub growth estimates to 7.6 million from 8.8 million a year ago, with 600,000 in the U.S. and 7 million for the international segment.

The projection suggests Netflix would add 26.7 million subs in 2019, down from 28.6 million last year.

Again, management alluded to “less precision” in its ability to forecast the impact of the current Q4 content slate, which consists of several new big IP launches (as opposed to returning seasons), the elevated sub churn in response to price changes, and forthcoming competition, i.e. Apple TV+, Disney+.

“While the new competitors have some great titles (especially catalog titles), none have the variety, diversity and quality of new original programming that we are producing around the world,” Hastings & Neumann wrote.

Indeed, the service said revenue growth has accelerated as domestic ARPU increased 16.5% from the previous-year period.

“With more revenue, we’ll continue to invest to improve our service to further strengthen our value proposition,” they wrote. “Our long term outlook on our business is unchanged.”

Finally, Netflix’s legacy by-mail disc rental service ended the period with more than 2.2 million subs, down from 2.8 million last year. The segment continues to generate substantial profits with more than $44 million added to the bottom line. That was down from contribution income of $51.6 million last year.

Wall Street welcomed Netflix’s increase profit (up 65% to $665 million) and relatively flat sub additions. Shares increased more than 8% in aftermarket trading.


Analyst: New Content Launches Will Help Netflix Meet Q3 Sub Growth Projections

With Netflix to report third-quarter (ended Sept. 30) financial results Oct. 16, all eyes will be on subscriber growth and whether the SVOD behemoth meets its 7 million global net sub additions estimate, including 800,000 in the United States.

Netlfix has projected topping 158 million subscribers world wide by the end of Q3.

Failure to meet projections on the eve of competitive service launches by Apple and Disney in November could see Wall Street continue to hammer the stock, which is down 33% since year-to-date high of $415 per share on June 20.

But perennial Netflix bear Michael Pachter with Wedbush Securities in Los Angeles contends the streaming service will meet its sub guidance due to a series of new releases in the quarter, including most notably the third-season launch of “Stranger Things” on July 4.

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“Upside to total subs guidance appears likely given the solid slate of new content that debuted in Q3, which should help dampen domestic churn,” Pachter wrote in a note. “We think guidance is easily attainable.”

That said, the analyst believes the Nov. 12 launch of Disney+ will expedite the impending loss of most Disney and Fox content, or about 25% of total viewing hours.

“We estimate that content from Comcast, Fox, Disney and Warner Bros. presently accounts for 60% to 65% of Netflix viewing hours, and we expect most of it ultimately to migrate away,” Pachter wrote.


Netflix Stock Loses All Gains Made in 2019

The end of the third quarter on Sept. 30 can’t come soon enough for Netflix.

The subscription streaming video behemoth saw all positive stock gains on Wall Street disappear at the close of trading Sept. 23 — with shares down 46% from a peak valuation in July.

With nonstop press releases touting programming defections (i.e. “The Office,” “Friends,”), executive hires, possible subscriber interest and low-ball pricing from pending SVOD newcomers Apple TV+, Disney+, HBO Max, Verizon’s BET+ and NBC Universal’s Peacock, Netflix’s invincibility has taken a beating.

Typically, any concern about Netflix would be quickly erased with the next earnings report. But following the service’s Q2 disclosure of rare subscriber losses in the United States and below-expectation sub growth internationally, all bets are off.

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Co-founder/CEO Reed Hastings himself seemed to voice caution just last week telling an industry confab in the United Kingdom that “a whole new [SVOD] world [would be] starting in November.”

Fickle Wall Street is (albeit slowly) changing its tune on Netflix.

Of the 39 analysts covering Netflix, two have “sell” ratings for the stock, while nine  have a “hold” on the shares.

Kannan Venkateshwar with Barclays said Netflix’s stock has become “very expensive” based on the growing costs required for future sub growth.

Mark Kelly, analyst with Nomura Instinct, told CNBC that increased third-party SVOD competition could make content more expensive and “diminish the price power” Netflix has exerted in recent years.

CNBC parent Comcast just expanded exposure for streaming service Xfinity Plex, and is launching the Peacock SVOD platform early next year.

Michael Pachter, a longtime Netflix bear at Wedbush Securities in Los Angeles, contends the challenges Netflix faces creating original content are no different than Disney+ & Co. face.

At the same time, Pachter says Netflix’s strategy of flooding the channels with content can’t mask quality issues.

“The company may brag about its Emmy nominations or its Oscar wins, but it has approximately 10 times as many shows eligible for Emmy consideration as HBO, which won handsomely in 2019 for multiple shows,” he wrote in a note.

Pachter suggests Netflix is on the verge of losing around 65% of its domestic viewing hours when Comcast, Warner/HBO and Disney/Fox launch services their services and allow their current deals to expire.

“We estimate that Netflix pays around $5 billion a year for this content, so it will have a ton of cash available to bid on other content, and its bid for “Seinfeld” shows that it is willing to raise the stakes for licensing content,” he wrote.

Indeed, Netflix inked an exclusive deal with “Game of Thrones” showrunners David Benioff and D.B. Weiss for a reported $200 million.

While Wall Street appears confident Netflix can continue growing subs worldwide, domestic growth will be challenged with the arrival of Disney+ and Apple TV+ in November.

“We think … that a slowing of domestic growth will continue to pressure the stock over the next several quarters,” Pachter wrote.

Navigating Netflix’s ‘Comeback’

With nearly 149 million subscribers globally, including more than 60 million in the United States, Netflix should have little to worry about as subscription streaming video-on-demand pioneer.

Yet, despite market valuation 122 times annual net income — after a 15% ($26 billion) drop in stock capitalization following sluggish Q2 subscriber growth numbers — Netflix is facing some tough decisions navigating a mature U.S. SVOD market and increased localization demands abroad, according to a new report from MIDiA Research.

Netflix net income in the first half of fiscal 2019 (ended June 30) fell nearly 9% to $614.7 million from $674.47 million during the previous-year period. At the same time, revenue costs increased 25.5% to $5.9 billion from $4.7 billion.

While the numbers might not appear alarming for a high-flying company like Netflix, it is important to remember that the service bases much of its spending on subscriber growth.

And Netflix lost 126,000 domestic subs in Q2 — the service’s first quarterly sub loss since 2011’s disastrous price hike debacle when the stock plummeted 75% in value. International sub growth stalled at 2.8 million from a projection of 4.7 million.

“Netflix still has brand equity within the future of video consumption in the U.S.; however, it now needs to strengthen that and provide a compelling engagement argument for the older demographics who are the most prone to the new direct-to-consumer services coming from Disney, Apple, NBC Universal and WarnerMedia,” read the report.

Netflix has begun the process by taking the unusual step of disclosing viewership data for original series, “Stranger Things,” which is reportedly tracking about 10.1 million viewers per episode for the current third season.

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The data is important considering MIDiA contends 59% of U.S. consumers between the ages of 16-19 stream Netflix on a weekly basis. But the report suggests Netflix will soon face unprecedented SVOD competition, including burgeoning Hulu and Amazon Prime Video.

“Content mix and features alone are no longer enough; now shows must have the brand resonance and content strategy to maintain audience demand between series,” read the report.

MIDiA contends Netflix should put increased focus on original content on education-based content such as documentaries, while working partnering with the top research universities.

“This content class would expedite the growth of brand awareness beyond the urban bridgeheads which Netflix has forged in emerging markets thus far,” read the report.

In addition, the report suggests that the inclusion of sponsored content, product placement, dynamic ad insertion and video games could bolster revenue growth going forward.

“From franchised games titles, through to strategic marketing partnerships, games are becoming a crucial part of the marketing and content mix for many shows,” MIDiA wrote.

The report says product placements, cobranded content, and increased leveraging of subscriber segments could trigger complementary revenue streams that offset the stalling net income versus increased costs.

“Games audiences represent a growing opportunity to extend TV show brand reach and engagement, with many games and TV titles having strong fanbase overlap (e.g. ‘Stranger Things’ / Assassins Creed),” MIDiA wrote.

Law Firm Investigating AT&T for Allegedly Misleading Investors About DirecTV Now Subscriber Growth

A law firm specializing in filing litigation against publicly-held corporations, is seeking plaintiffs for a possible class action suit against AT&T regarding its standalone online TV streaming service, DirecTV Now.

The Law Offices of Howard G. Smith, in an April 2 press release, said AT&T in June 2018 issued nearly 1.2 million new shares of common stock following its $85 billion acquisition of Time Warner – which led to the formation of WarnerMedia.

At issue is AT&T’s registration statement accompanying the stock issuance that claimed DirecTV Now subscriber growth would offset ongoing subscriber declines at legacy pay-TV services DirecTV satellite service and AT&T U-verse.

Instead, after AT&T raised DirecTV Now’s monthly pricing from the promotional $39.99 fee to $49.99, subscriber growth reversed to sub losses – more than 250,000 DirecTV Now subs jettisoned in the most-recent fiscal period.

“On this news, shares of AT&T fell as low as $27.36 per share, a decline of nearly 16% from the $32.52 price per share on the exchange date for the acquisition, thereby injuring investors,” Howard G. Smith wrote in the release.

In a media statement, AT&T denounced the action.

“This is a carbon copy of a baseless suit filed in February,” said the telecom. “In both cases, the claims are wholly without merit.”