Today Netflix released its financial results for the third quarter of 2019, which come with surprises and mixed figures. For example, it exceeded the earnings but not the revenue that analysts expected. And something similar happened with the new subscribers, since in the United States it was below what was expected, while in the rest of the world it exceeded expectations by adding 6.26 million new members.
That is to say, Netflix closed the third quarter of the year with 158 million subscribers globally, an increase of 21% over the same period of the previous year. This was welcomed in the stock markets, where Netflix shares are now shooting up to 8%.
But the really interesting thing of all is the letter that Reed Hastings, CEO of Netflix, sent to the company's investors, where try to calm the waters before the aforementioned 'streaming war' that is coming. And it is that Netflix does not believe that it is for as much, since yes, they anticipate that there are changes and possible losses in the short term, but in the long term they affirm that it will benefit the streaming market.
The arrival of new platforms "will make a lot of noise", but will benefit the market in the long term
In this new letter addressed to shareholders, Netflix is confident and focused on what's coming, since they affirm that the arrival of new streaming platforms "will make a lot of noise", so they anticipate that their short-term growth will have "a modest adverse effect". In fact, Netflix already contemplates that slower than expected annual growth will be reflected in the results of the next quarter.
However, Netflix believes that the key is long term, since the arrival of more platforms will be "a great opportunity for the market" where thanks to the "strength of its service" will continue to grow. And is that Netflix says the opportunity is in traditional television users, which continue to represent a large percentage worldwide.
That is, Netflix says that it will be more likely to "convert" traditional TV users to streaming, than to steal users between platforms.
"Many are focusing on the 'streaming war', but we have been competing against streamers (Amazon, YouTube, Hulu) as well as with traditional television for more than a decade. The next arrival of services such as Disney +, Apple TV +, HBO Max and Peacock will increase competition, but we are all small when compared to traditional television.While the new competitors have some great titles (especially catalog titles), none has the variety, diversity and quality of the new original programming that we are producing around the world. "
Netflix has invested almost 15,000 million dollars in original content for the fourth quarter of the year, and they claim that their strategy will allow them to make "risky decisions", since they don't depend on "catalog content" like the rest of their competitors, making clear reference to Disney, HBO and NBCUniversal.
They also announced that from now on they will no longer "pursue all the agreements they have on the table", this in reference to the licenses of that catalog content owned by the big chains. Since they ensure that today they have a "multi-million dollar budget and solid subscriber base" which will allow them to carry out a wide variety of different projects.
In fact, they took the opportunity to offer figures of some of their shows, for example of what is now their most successful series, 'Stranger Things', which for its third season was seen by 64 million accounts during the first four weeks, this according to the figures of Netflix itself.
Netflix also took the opportunity to anticipate that for the four-quarter results, users and revenues will be divided by region for the first time, which will include results for Asia Pacific, Europe, the Middle East and Africa, Latin America, and the United States and Canada.