Earnings Report: Overseas Subscribers Increase by 8.3 Million
EPS and Revenue Exceed Market Expectations
Conservative Q1 Outlook Amid OTT Competition from Disney Plus, Apple TV, and Others
[Asia Economy Reporter Kim Heung-soon] Netflix, the world's largest online video service (OTT), posted better-than-expected results for the fourth quarter of last year. However, evaluations suggest that it is expected to face difficulties starting this year due to the aggressive competition from OTT platforms such as Disney and Apple.
◆ Maintaining the title of global OTT No.1 = According to Netflix's fourth-quarter results announced on the 21st (local time), the number of overseas subscribers watching Netflix in the global market reached 8.3 million. This figure significantly exceeded the market expectation of 7.17 million. Although the number of paid subscribers in the U.S. increased by 550,000 during this period, which was less than the market expectation of 589,000, the increase in overseas subscribers offset this. As a result, the total number of paid Netflix subscribers as of 2019 was counted at 167 million.
Netflix's earnings per share for the fourth quarter of last year were $1.30. This was a decrease from $1.47 in the previous quarter but higher than the $0.52 expected by Wall Street analysts. Quarterly revenue also exceeded market expectations at $5.47 billion, surpassing the forecast of $5.45 billion and the $5.2 billion recorded in the third quarter of last year.
◆ "The OTT war starts this year" = However, there are negative outlooks for the expected results in the first quarter of 2020. This is because competition awaits from streaming contenders such as Disney's OTT platform Disney+, which plans to expand globally starting this year, Apple's Apple TV Plus, WarnerMedia's HBO Max, and Comcast's Peacock.
The U.S. economic media Forbes predicted, "Netflix has not been significantly threatened in the fierce streaming war so far, but it will face tough times from now on." Disney+ is cited as a major rival. After launching its service in the U.S. last November, it gathered 24 million subscribers in less than a month, surpassing market expectations. In March, it plans to expand its service to Western Europe a week earlier than originally planned, followed by entry into India and Southeast Asia in June, and Eastern Europe and South America in October. It could also land in Asian markets, including South Korea, as early as this year. Particularly, it is leveraging its vast content library accumulated through existing movies and animations and competing with a lower base fee ($8.99 for Netflix, $6.99 for Disney+).
◆ Counterattack through content investment = Netflix seems to have taken this into account and projected conservative expected results for the first quarter of this year. It forecasted an increase of 7 million paid subscribers during this period, a significant decrease from 9.6 million in the same period last year. Expected revenue is $5.73 billion, slightly less than the market expectation of $5.76 billion.
Netflix plans to focus on strengthening content to respond to competition from OTT platform rivals. Global market research firm BMO Capital analyzed on the 17th that Netflix will invest $17.3 billion (approximately 20.5 trillion KRW) in content this year and will continue to increase the investment amount annually, reaching $26.3 billion (30.48 trillion KRW) by 2028. This is also interpreted as a measure to gain an advantage over competitors. Reed Hastings, Netflix CEO, emphasized, "We will not reduce investment in content."
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