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Netflix added record number of subscribers, but warns of tougher times ahead

Netflix added record number of subscribers, but warns of tougher times ahead

Netflix (NFLX) is on the brink of 150 million subscribers.

The streaming company added a record 9.6 million new subscribers in the first quarter of 2019, 1.74 million of whom are from the US, according to its latest earnings reportwhich was released Tuesday. Netflix and analysts predicted that it would bring in roughly 9 million new subscribers. Netflix now has 148.8 million subscribers globally, 60.2 million of whom are from the US.

Profit in the first quarter of 2019 rose to $344 million from $290 million in the first quarter of last year. Revenue went up 22% to $4.52 billion.

The service said it expects to add another 5 million subscribers in the next quarter, which ends in June.

Netflix’s growth could take a hit as Apple and Disney‘s streaming services enter the market later in the year. Both companies unveiled their streaming plans recentlytouting lineups of exclusive content that they hope will rival what Netflix offers.

The company’s stock was slightly down in premarket trading Wednesday. The drop is likely due to weak guidance for the next quarter as its subscriber growth slows and as its pricing increases. But the company’s record numbers this quarter show just how much of a global powerhouse it is, and what competitors like Disney and Apple are up against.

“Netflix has such a huge head start and it’s a beloved brand in streaming,” Jill Rosengard Hill, an executive vice president at Magid, a research-based media firm, told CNN Business. “Think about how ‘Netflix and Chill’ is such a part of vernacular today. Consumers associate Netflix with streaming.”

Netflix said in its letter to shareholders that it doesn’t “anticipate that these new entrants will materially affect our growth” because transitioning from “linear to on demand entertainment is so massive” and “because of the differing nature of our content offerings.”

“We believe we’ll all continue to grow as we each invest more in content and improve our service and as consumers continue to migrate away from linear viewing,” the company said.

“Great competition makes you better,” Netflix CEO Reed Hastings said on the earnings call. “We’re thrilled to have Disney and Apple in. They’re awesome companies. Just to be in the same league as them is very exciting for us.”

Disney’s (DIS) service, Disney+, which will launch on November 12, 2019 in North America, comes loaded new and existing content from the company’s most popular brands, including multiple shows coming from Marvel Studios, an original “Star Wars” series called “The Mandalorian,” Pixar films and shorts, documentaries from National Geographic, and Disney animated classics like “Aladdin” and “Bambi.” The service will also be the exclusive home to 30 seasons of “The Simpsons” — TV’s longest running prime time scripted series.

But the biggest selling point of Disney+ may be its price. It’ll cost $6.99 a month — or half of what Netflix charges for its standard plan.

“I think Disney is going to come out with an extremely compelling product because of those huge beloved franchises,” Hill said. “That price is affordable, lower than a price of a movie ticket, for a library that’s deep and diverse. But that doesn’t necessarily mean that subscribers will cancel Netflix.”

Magid’s data shows that consumers are willing to subscribe to an average of six streaming services and that Netflix “continues to increase its value to consumers through delivering new original series weekly,” Hill added.

“As much as people love nostalgia, consumers are also looking for new, original storytelling and Netflix is spending billions on content to give them that,”she said.

The company burned through $3 billion in 2018 to pay for hit originals such as “Birdbox” and “Ozark.” Negative free cash flow in the first quarter of 2019 grew to $460 million, compared to $237 million a year ago.

Apple, (AAPL) which put together a star-studded event last month to showcase its streaming video offering, is reportedly spending $1 billion to pay for its own slate of original content. The company is working on projects with some of the biggest names in Hollywood, including Oprah Winfrey, Reese Witherspoon and Steven Spielberg.

Apple’s offering will launch this fall, but it has not yet revealed a price for the service or said exactly how many shows it will have at launch.

AT&T (T)’s WarnerMedia, which is CNN’s parent company, and NBCUniversal, are bothalso launching services this year.

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