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Netflix Adds 8.8 Million Subscribers in Q4, Cites Competition for Lower U.S. Gains

Netflix beat its forecast for overall subscriber additions for the fourth quarter of 2019, while it brought in fewer than expected U.S. streaming customers.

The company added a net 420,000 streaming customers in the U.S. and 8.33 million overseas in the year-end 2019 quarter, for a total of 8.76 million net adds. Netflix had previously forecast a total of 7.6 million paid net adds for Q4 (600,000 in the U.S. and 7.0 million internationally).

Netflix posted revenue of $5.47 billion and earnings per share of $1.30. Analysts on average had expected $5.45 billion in revenue and EPS of 53 cents. In Q4, Netflix recorded a $437.6 million tax benefit, explaining that it had “over-accrued” U.S. tax payments during the first three quarters of 2019.

The company ended 2019 with 167.1 million streaming customers worldwide including 61 million in the U.S. and 106 million internationally. Shares of Netflix dipped in after-hours trading before rebounding into positive territory.

“Our low membership growth in [the U.S. and Canada] is probably due to our recent price changes and to U.S. competitive launches,” the company said in its quarterly shareholder letter.

In the fourth quarter, Netflix faced the launch of a vigorous new streaming entrant in Disney Plus, which bowed in the U.S., Canada and a few other territories in November, signing up an estimated 24 million users in less than a month. Major players marching into the direct-to-consumer streaming space this year include WarnerMedia’s HBO Max and NBCUniversal’s Peacock.

Netflix said that in in Q4 — despite the big debut of Disney Plus and the launch of Apple TV Plus — viewing per member grew both globally and in the U.S. on a year-over-year basis.

“Many media companies and tech giants are launching streaming services, reinforcing the major trend of the transition from linear to streaming entertainment,” Netflix said in the shareholder letter. “We have a big headstart in streaming and will work to build on that by focusing on the same thing we have focused on for the past 22 years — pleasing members.”

For the first quarter of 2020, Netflix projected total paid net adds of 7.0 million. That’s lower than the 7.86 million projected by Wall Street analysts and comes off an all-time high of 9.6 million net adds in Q1 2019. Netflix’s financial guidance for Q1 2020 is for revenue of $5.73 billion (slightly under $5.76 billion consensus analyst estimate) and earnings per share of $1.66 per share (vs. Wall Street estimate of $1.19 per share).

Netflix originals released in Q4 included several awards contenders: Martin Scorsese’s “The Irishman” starring Robert De Niro, Al Pacino and Joe Pesci; “The Two Popes” starring Anthony Hopkins and Jonathan Pryce; and Noah Baumbach’s “Marriage Story” starring Scarlett Johansson and Adam Driver.

Original series that premiered in the quarter included “The Crown” Season 3 and live-action fantasy series “The Witcher” — the latter of which Netflix said is on track to be its most-watched TV series season 1 to date with 76 million customers tuning in during the first four weeks. That said, Netflix changed how it reports viewing numbers to count any account selecting and watching a title for at least 2 minutes.

Netflix said it had Q4 record paid net adds in Europe/Middle East/Africa, Latin America and Asia-Pacific regions. The company reported a gain of 4.42 million subscribers in EMEA; 2.0 million in LatAm; and 1.75 million in APAC.

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