Netflix Admits Disney+ May Have Cut U-S Subscriber Growth

Netflix Inc. missed its forecast for U.S. subscriber growth for the third straight quarter, but blew through its expectations for overseas expansion, a mixed performance that comes as the streaming giant faces heightened competition from a gaggle of rivals, reports The Wall Street Journal.

The Los Gatos, Calif., company said Tuesday that it added 423,000 domestic subscribers in the fourth quarter, compared with its forecast of 600,000 additions. It also posted an increase of 8.3 million subscribers in overseas markets, more than the seven million the company was expecting. It now has 167 million subscribers world-wide, including 60.4 million in the U.S.

The results underscore that Netflix has two very different stories to tell Wall Street at the moment. Its operations abroad look as promising as ever, without any sign of a significant competitive threat, while clouds are beginning to gather in the company’s home market, where rivals are offering new services and chasing creative talent in Hollywood.

WSJ Graphic

In November, Walt Disney Co. ’s Disney+ streaming platform went live with a $6.99 monthly service that offers a range of content including animated classics and the “Star Wars” and Pixar franchises. Disney said a day after the service began that it had signed up 10 million users, but the company has yet to provide updated results.

Apple Inc. launched Apple TV+ the same month, offering consumers access for $4.99 a month. Netflix’s standard plan costs $12.99 a month. Apple has a relatively small offering of original shows and doesn’t possess the vast libraries of classic programming that Netflix and others have.

This spring, Comcast Corp. ’s NBCUniversal and AT&T Inc.’s WarnerMedia plan to introduce their direct-to-consumer streaming services: Peacock and HBO Max, respectively.

On a call with investors and analysts, Netflix Chairman and Chief Executive Reed Hastings said the new competition wouldn’t prompt significant strategy changes at the company. “We’ve had the same strategy for 20 years: Please our members and they help us grow,” Mr. Hastings said.

Disney+, Hastings said, is likely to take just “a little from us” and pose a bigger threat to traditional television.

The streaming service noted in its first quarterly earnings report of 2020 on Tuesday that it has changed the definition of viewership — while Netflix NFLX, -0.46%  used to consider any customer that streamed 70% or more of a single episode or film as having viewed that property, it now will count a view after viewing two minutes or any offering. The company admitted that it would boost the limited viewership numbers it provides by more than one-third.

“The new metric is about 35% higher on average than the prior metric,” Netflix executives said in their quarterly letter to shareholders. “For example, 45m member households chose to watch ‘Our Planet’ under the new metric vs. 33m under the prior metric.”

The company said it has a “big head start in streaming” and believes it will “continue to prosper,” even in a tougher battleground. The growing number of streaming services, Netflix told shareholders, will harm traditional TV, not its own business.

Netflix reported a fourth-quarter profit of $586.9 million, or $1.30 a share, as a one-time tax adjustment bolstered the bottom line. Revenue rose 31% to $5.47 billion.