Reed Hastings, co-CEO of Netflix, participates within the Milken Institute Global Conference on October 18, 2021 in Beverly Hills, California.
Patrick T. Fallon | AFP | Getty Images
The newest Netflix shareholder letter included a line heard all over the world:
“While this added competition could also be affecting our marginal growth some…”
That clause would not sound like a lot, however it’s Netflix’s strongest admission thus far that streaming competition is affecting its subscriber growth.
Typically in Netflix’s competition part, the corporate claims Netflix competes in opposition to many alternative issues (sleep! TikTok!), however different streaming companies do not pose a lot of a menace. Netflix has routinely argued there’s greater than sufficient streaming viewing time to go round. It did once more this quarter, noting that Netflix is still less than 10% of U.S. television screen time.
But acknowledging, even considerably subtly, that competition is affecting Netflix’s subscriber additions is a uniquely daring declaration for the corporate, mentioned Michael Nathanson, a media analyst at MoffettNathanson. It’s a sign the streaming big is lastly feeling some aggressive impacts of different companies similar to Disney+, WarnerMedia’s HBO Max, ViacomCBS‘s Paramount+ and NBCUniversal‘s Peacock.
“They have normally dismissed it as a blip,” mentioned Nathanson of rival streamers.
Competitive strain is notably essential within the U.S. and Canada, the place Netflix just raised prices final week, together with bumping its normal plan from $13.99 per 30 days to $15.49. If competition is really beginning to erode some growth, it will increase the chance {that a} value hike may enhance churn.
Netflix’s content material is nonetheless in excessive demand. Six of the highest 10 most searched exhibits globally have been on Netflix in 2021, the corporate famous in its shareholder letter. It had the year’s biggest hit in “Squid Game.”
But traders could also be searching for extra, leading to plummeting shares after the company forecast simply 2.5 million subscribers for the primary quarter of 2022, beneath the three.98 million it added in Q1 2021.
Netflix’s value enhance made its normal plan dearer than HBO Max. Getting a popularity as the most costly mainstream streaming service could not assist with restarting growth.
Disclosure: Comcast’s NBCUniversal is the father or mother firm of CNBC.
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