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Netflix adds record 9.6 mn subs in Q1 2019

The company reported lower guidance for the second quarter.

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MUMBAI: Streaming giant Netflix beat analyst estimates in its first quarter earnings and added record number of subscribers. The streaming platform reported paid net additions of 9.6 million in Q1 2019, up 16 per cent year-on-year (y-o-y). In terms of revenue also, it reported $4.52 billion in revenue in the quarter, higher than projected.

The subscriber growth includes 1.74 million from the domestic market and 7.86 million internationally against 1.61 million and 7.31 million estimates respectively. Its revenue rose 22.2 per cent y-o-y, reporting $4.52 billion compared with $3.7 billion a year earlier. Earnings per share climbed to 76 cents in the quarter from 64 cents in Q1 2018.

However, Netflix shares fell after market closing due to its low guidance for the next quarter. The company has projected total net adds of 5 million with 0.3 million in the US and 4.7 million for the international segment, down 8 per cent y-o-y.  

“We’re working our way through a series of price increases in the US, Brazil, Mexico and parts of Europe. The response in the US so far is as we expected and is tracking similarly to what we saw in Canada following our Q4’18 increase, where our gross additions are unaffected, and we see some modest short-term churn effect as members consent to the price change,” Netflix stated in its letter to shareholders.

The platform is also hoping for an eventful second half of the year in terms of global content as it is bringing new seasons of its biggest hits including Stranger Things, 13 Reasons Why, Orange is the New Black, The Crown and La Casa de Papel. It will also release big films like Michael Bay’s Six Underground and Martin Scorsese’s The Irishman. On the back of its content slate, Netflix expects another year of record paid subscriber addition.

Recently, Apple and Disney unveiled their streaming services in the market which has been seen as a tough challenge for Netflix. Moreover, the rich content library and cheaper pricing of Disney+ has raised questions for Netflix monopoly in digital entertainment. But the company seems unfazed by the entry of two giant rivals and is “excited to compete”.

“We don’t anticipate that these new entrants will materially affect our growth because the transition 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,” Netflix said.

The company expects 2019 free cash flow deficit to be modestly higher at approximately -$3.5 billion due to higher cash taxes related to the change in their corporate structure and additional investments in real estate and other infrastructure. But it is still expecting free cash flow to improve in 2020 and each year thereafter, driven by growing member base, revenues and operating margins.

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