netflix-warns-of-a-039headwind039-as-new-rivals-loom

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Netflix

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Stranger Things is one of Netflix’s most popular shows

Netflix has warned investors that it faces a “headwind” in coming months, as rivals such as Apple and Disney launch competing services.

The forecast comes as the video streaming company is already seeing its membership growth slow.

The firm added about 6.8 million paid subscribers in the three months to 30 September, just shy of its prediction of seven million.

It said the miss was the consequence of an earlier price increase in the US.

The company added about 500,000 new members in the US and 6.3 million from overseas, contributing to a total of more than 158 million paid subscribers.

Eric Haggstrom, analyst at eMarketer, said the slowing growth “spells trouble”, given that the products from Apple and Disney have yet to debut.

Those companies are due to launch streaming products in November. Other companies are getting in the game, including HBO and NBCUniversal. Even cinema chain AMC Theatres announced its own streaming service this week.

“The fact that Netflix has shown disappointing growth without the new competition present, is a negative omen for Netflix in 2020 and beyond,” Mr Haggstrom said.

However, the firm’s shares gained in after-hours trade, as its performance was better than had been expected.

‘Modest headwind’

Netflix had been under a cloud since last quarter, when it revealed it had lost US streaming customers for the first time in eight years and missed targets for new subscribers overseas.

This quarter, the firm reported profit of $665m, up 65% from $403m a year earlier. Revenue rose 31% to $5.25bn from about $4bn.

Netflix leaders said they remained confident of the firm’s long-term prospects, noting that the firm has been competing against traditional television and firms such as Amazon and YouTube for years.

“While the new competitors have some great titles (especially catalogue titles), none have the variety, diversity and quality of new original programming that we are producing around the world,” they wrote in a letter to shareholders.

New streaming services are more likely to steal audiences from traditional television, they added.

“There may be some modest headwind to our near-term growth,” Netflix said. “In the long-term, though, we expect we’ll continue to grow nicely given the strength of our service and the large market opportunity.”