Netflix adds 9.6M subscribers in 1Q as competition heats up
SAN FRANCISCO (AP) — Netflix kicked off the year with the biggest subscriber gains in the history of its video streaming service, but forecast a springtime slowdown that disappointed investors.
The strong first-quarter performance coincided with the video streaming service's biggest U.S. price increases and emerging streaming challenges from Walt Disney and Apple, two of the world's most popular brands.
The video service added 9.6 million subscribers worldwide during the first quarter of 2019, topping the projections of both Netflix's own management and Wall Street analysts. It's the most subscribers that Netflix has gained during any three-month stretch since the Los Gatos, California, company unveiled its streaming service 12 years ago.
The surge announced Tuesday left Netflix with nearly 149 million subscribers through March.
Netflix expects to add another 5 million subscribers during the current quarter ending June, but that projection fell well below analysts' forecast. It would also represent a decline from the 5.9 million customers that the service picked up during the same period last year.
Netflix's stock briefly dipped by almost 2% in extended trading to $353 after the numbers came out. In regular trading, shares rose 3% to $359.46.
The company tested the bounds of its popularity with a recent a recent price hike that raised the cost of its most popular plan to $13 a month, a $2 increase. New U.S. subscribers had to start paying the higher price in January, but it only recently started to hit existing customers.
Netflix says it doesn't expect the price increase to trigger significant cancellations, thought its second-quarter forecast implies otherwise. The company expects to add just 300,000 U.S. subscribers from April through June, down from 700,000 at the same time last year.
Competition facing Netflix will heat up toward the end of this year when both Disney and Apple plan to start selling their own video streaming services backed by big budgets.
Disney's offering, due out in November, could be a bigger threat because it will feature a library of classic films supplemented with original programming cooked up by a company with a proven record of churning out crowd-pleasing entertainment. What's more, the service — called Disney Plus — initially will cost just $7 per month.
Apple hasn't disclosed the pricing of its service, which will include programs featuring renowned stars such as Oprah Winfrey, Jennifer Anniston and Jason Momoa, nor a specific date for its debut.
Besides the good news on subscribers, Netflix's first-quarter profit of $344 million rose 19% from the same time last year; it included a $58 million gain from currency adjustments. The company earned 76 cents per share during the first quarter, 18 cents above the estimate among analysts polled by FactSet.
Netflix's revenue climbed 22% to $4.5 billion.
But the company continues to spend more cash than it is bringing in as it pours money into a lineup of TV series and films that has been attracting more subscribers. The company burned through another $460 million in the quarter and expects its negative cash flow this year to exceed last year's total of a negative $3.5 billion.