Mixed Results for Netflix

Netflix said Thursday that it added nearly nine million new paying subscribers during the final three months of 2018, beating its own expectations of 7.6 million new subscribers. The service now has 139 million subscribers globally. It expects to add another 8.9 million subscribers in the quarter that ends in March, the vast majority of which are expected to come from strong growth in its international markets.

Expectations were high for the company heading into the holiday quarter report. The stock had soared roughly 50% from its low hit in late December amid a broader market sell-off. Netflix stock was down about 3% in afterhours trading Thursday following the report.

The earnings report comes at the start of what could be a pivotal year for the company. Two days before releasing the fourth quarter earnings report, Netflix unveiled plans to raise its monthly subscriber prices in the U.S. by $1-$2 per month, depending on the membership plan.

In a letter to shareholders Thursday, Netflix said it expects the price hike to be “phased in” for existing customers in the first two quarters of 2019. The pricing change takes effect immediately for new customers. The price increase could help Netflix foot the bill for its staggering spending spree on content. Netflix previously said it expected to spend $8 billion on programming in 2018, up from an estimated $6 billion the year before.

In an analyst interview that was posted after the earnings report Thursday, Netflix’s Vice President of Finance and Investor Relations Spencer Wang did not explicitly state a content budget for 2019 but signaled that there will be “higher content spend” going forward. But this latest price hike comes at a time when the streaming market is about to get even more crowded.

A host of deep-pocketed competitors are expected to launch streaming services this year, including Apple, Disney and WarnerMedia, the parent company of CNN. That’s in addition to rival services on the market from Amazon, Hulu and Google’s YouTube.

“The latest price increase may slow domestic subscriber growth dramatically this year,” Michael Pachter, an analyst with Wedbush, wrote in an investor note Tuesday. He noted that streaming options from Amazon and Hulu are now slightly more affordable than Netflix.

 

Todd “Bubba” Horwitz