TV, not DTC, the real competition to Netflix | VOD | News | Rapid TV News
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In the wake of third quarter results that have impressed Wall Street even if growth in US net sub adds has stalled, and just as it faces real competition from direct-to-consumer rivals, Netflix has identified traditional TV as its real rival.
netflix mirada 17July2019
For the quarter ended 30 September 2019, the subscription video-on-demand firm posted overall revenues of $5.2 billion, up 31% over the prior year while operating income doubled on an annual basis to $1.0 billion. Driving the growth was an overall total of 6.8 million paid net additions which while 700,000 above the figure reached in Q3 2018 , a rise of 12% and a record for a third quarter, was 200,000 under that expected.

Growth was virtually all international. In the US, paid net adds totalled 500,000, 300,000 fewer than forecast, but it was a much brighter picture for international business where net adds exceeded expectation totalling 6.3 million for the quarter, a 23% increase year-on- year ago quarter and above guidance forecast.

Some are seeing the results as something as a high-water mark for Netflix which will see much fiercer competition from the fourth quarter of 2019 when the likes of Apple and Disney arrive with their direct-to-consumer services along with traditional rivals such as Amazon, TimeWarner, NBC and Hulu.

Yet in the Q3 Analysts’ call, CEO Reed Hastings seemed hugely relaxed at the coming months. Indeed, he kicked off his call by saying that with so many firms now looking to provide premium video content to consumers, it was a great time to be a creator of content.

Looking at the broader competitive environment, Hastings made the point that while there would be much stiffer competition in Q4, his company didn’t compete against other SVOD providers or even the new DTC firms but instead battled it out broadly for entertainment time.

“There are many competitive activities to Netflix (from watching linear TV to playing video games, for example). But there is also a very large market opportunity; today we believe we’re less than 10% of TV screen time in the US (our most mature market) and much less than that in mobile screen time. Many are focused on the streaming wars, but we’ve been competing with streamers (Amazon, YouTube, Hulu) as well as linear TV for over a decade.

"The upcoming arrival of services like Disney+, Apple TV+, HBO Max, and Peacock is increased competition, but we are all small compared to linear TV. The launch of these new services will be noisy. There may be some modest headwind to our near-term growth, and we have tried to factor that into our guidance. In the long-term, though, we expect we’ll continue to grow nicely given the strength of our service and the large market opportunity... In our view, the likely outcome from the launch of these new services will be to accelerate the shift from linear TV to on demand consumption of entertainment.”

Hastings stated clearly that continuing to make massive investment in original content was the way forward for the company. He noted that Netflix would be expanding its non-English language original offerings because they continue to help grow penetration in international markets and also would be investing ‘aggressively’ in original films