Netflix finally acknowledged what we all knew.
With the ongoing wars beginning in just a few weeks, Netflix is facing stiff competition for the first time since it started streaming a decade ago.
And that competition from the upcoming releases of Disney + and Apple TV +, along with several other major media brands such as HBO and NBC, could have a negative impact on Netflix's subscriber growth.
Netflix revealed these issues after its mixed earnings report on Wednesday, which showed winnings but a loss of subscribers. The company also forecasts it will add fewer subscribers in the fourth quarter of this year than a year ago.
And the reasons are obvious:
The price increase makes people write off. In January this year, Netflix raised prices, with the most popular HD streaming plan going from $ 1
"Since our price increase in the United States earlier this year, retention has not yet returned fully on a sustainable basis to pre-price levels. which led to slower membership growth in the US, "the letter said.
The price hike comes as Disney + and Apple + plan to offer their services far cheaper than Netflix. Disney +, which includes a massive library of Disney, Marvel and Pixar shows and movies, will cost $ 6.99 per month, and Apple TV +, which will only have a handful of shows at launch, will cost $ 4.99 per month. (Apple TV + it will also be free for a year if you buy a new Apple gadget like the iPhone 11.)
Competition from new streamers can hurt subscribers' growth. Netflix says in its letter to shareholders that the "noisy" launch of a new streaming service could lead to "some modest progress toward our recent growth."
Apple TV + launches November 1. Disney + launches November 12. in the coming months there we will have the launch of Peacock by NBC and HBO Max by WarnerMedia's AT&T.
The result: Netflix forecasts 7.6 million global net additions for the quarter compared to 8.8 million in the same quarter one year earlier. During a call for the company's profits, CEO Reed Hastings said he hoped to overturn those muted expectations, but the fact that the company warns of slower growth may be on the horizon is an acknowledgment that competition fears are very real.
what is Netflix's plan to counter these new threats?
Contents. Content. And more content.
Netflix continues to reinvest billions back into programming and has numerous new movies and shows to launch over the next few months, including the buzzing Martin Scorsese, the flickering Irishman, and the fantasy epic television show The Witch. "
During Wednesday's earnings interview, top Netflix executives said they would continue their production strategy to show that people love and do it regularly so they don't lose subscribers in neighborhoods when there's nothing to watch, (Which is what we saw when Netflix lost subscribers in the second quarter.)
But there was another interesting note in the conversation about content strategy. Netflix content chief Ted Sarandos revealed how popular franchises play streaming. Disney + will started with the popular and proven fran chases ranging from Mickey Mouse to Star Wars to the Simpsons. Disney will have 70+ years of great franchises ready to watch when the service launches. But Netflix must build its own franchises from scratch.
Sarandos appeared for
"I think it's as valuable as building a bunch of different franchises and waiting to burn," Sarandos told Netflix, building its franchises during Wednesday's earnings call.
But this is also a problem with Netflix content in two words.
It has not been proven yet that it can create a Disney caliber franchise. Stranger Things may be the closest thing to you, but it's not enough to keep Netflix subscribers active throughout the year and across seasons. In the meantime, Netflix will lose some of its most popular third-party franchises, such as the Office and Friends of its competitors.
In short, Netflix acknowledged this week that it can be too expensive and not have enough engaging things to watch to keep subscribers growing at the levels it needs.
Disclosure: NBC is part of NBCUniversal, the parent company of CNBC.