LOS GATOS, Calif. – Netflix reported its fourth quarter results showing 125,000 more Canadians subscribed to the service in the quarter ended December 31st as the streaming company faces increased competition from major challengers.
This quarter is the first where Netflix may have been affected by the launch of Disney’s own streaming service, Disney+, in November. On Tuesday evening, in a video interview, Netflix CEO Reed Hastings said Disney+ is having an impact, but more so in linear TV than its own service.
Disney Plus is “primarily going to take away from linear TV and takes away a little bit from us, but most of the growth in the future is coming out of linear TV,” he said.
Tuesday’s release comes after the company changed the way it reports membership numbers by breaking them out into regions – now, the United States and Canada (UCAN) are grouped together in a separate category, as opposed to the U.S. and international categories previously. Revenue in this region increased to about US$2.7 billion in the quarter.
The company’s growth here has stalled in the quarter: it only added 423,000 new subscribers in the U.S. and Canada in Q4 compared to about 1.5 million in the same period last year. It saw a gain of 517,000 net subscribers in Q3, where the company reported roughly 6.5 million Canadians subscribed to the service. However, the landscape has changed since: new entrants, including Disney+ and Apple TV+ – both launched in November — have stepped into the fray in Canada.
“Our low membership growth in UCAN is probably due to our recent price changes and to U.S. competitive launches,” the company said in a shareholder letter. It observed a “more muted impact from competitive launches outside the U.S. (NL, CA, AU). As always, we are working hard to improve our service to combat these factors and push net adds higher over time.”
According to an app tracking company called Apptopia, as of last month, Disney Plus – which is live in Canada, the U.S., New Zealand, Australia and the Netherlands – has been downloaded more than 22 million times – 85% of which is in the U.S. The streaming service is among the least expensive services of its type, running at US$7 per month.
In the video interview, Netflix chief product officer Greg Peters added that the 24% increase in year-over-year revenue in the quarter in the States shows the company is growing, and points to the its ability to raise prices down the line as it improves its product. A recent report in Variety said the company is looking to invest more than US$17 billion in 2020 on content.
Netflix chief financial officer Spencer Neumann confirmed the company will continue to increase spending on content this year, but didn’t specify how much.
To that end, Netflix cited those most recent new streaming services in its report to shareholders, stating it still has a “big head start” on new steaming competitors around the world. “Our viewing per membership grew both globally and in the U.S. on a year over year basis, consistent with recent quarters,” it said.
Disney is expected to announce its earnings, and progress on Disney+, in early February.
The company also said “viewing per membership” is up, the metric for which Netflix has decided to change this quarter. Instead of a customer having to watch 70% of a show to be logged as a view for any particular movie or episode, it will now look to measure viewership based on just two minutes of content viewing. Netflix says this makes more sense because the service now has an expanding database of both shorter-form and longer content.
Last month, the company reminded investors, it released a new series called The Witcher, based on the video game of the same name. Its “tracking to be our biggest season one TV series ever,” says the note to shareholders. It compared the different streaming services by search engine searches for the other competitors’ major hits, which showed The Witcher leading.
In terms of the coming year, competition will not slow. A number of new services are slated to be released, including NBCUniversal’s Peacock and HBO’s Max. Hastings added Tuesday that the quality of his service two or three years from now will be “so much higher than it is today.”
In the midst of all that competition, Hastings reiterated that the company will not be taking advertising on its service, largely because Facebook, Google and Amazon control so much of the digital ad space and that it’s committed to not collecting user data to “exploit” for targeted advertising.
