Netflix CEO Reed Hastings doesn’t seem too concerned with Amazon’s new monthly Prime video membership program.
After his company posted its Q1 earnings report — which beat Wall Street’s expectations for EPS but still sent shares down nearly 15 percent due to its Q2 outlook — Hastings talked about the future of Netflix.
One of the initial questions, unsurprisingly, was about Amazon’s new monthly Prime membership for its video streaming service that rolled out Sunday evening and starts at $8.99 per month — one dollar less than Netflix’s standard offering.
Hastings responded by speaking about the overall competitive streaming landscape, noting that Amazon’s move is part of “the natural evolution from linear TV to internet TV.”
“Hulu is doing some great work; Amazon is; HBO; Showtime,” he said. “There are so many competitors and everyone is working hard to build the best content. We are seeing growth in the overall internet TV market that is displacing linear TV, so it’s natural that everybody is coming in as they realize that the future is internet TV.”
Hastings also said that Netflix competes with more than just fellow streaming services.
“When you think about your own experience with what you’d do some night if you’re not watching Netflix — once in a while it’s cable television; once in a while it’s video gaming; it’s browsing Facebook; killing time on the web,” he explained. “There is so much out there. Our only inhibitor in our growth is, how great is our service? Can we make it so there is never buffering and it always starts up instantly; so recommendations are incredible; and the content is exciting?
He added: “If we can do all that, then we’ll continue to grow globally even though HBO or Dish or others are also growing. Their growth doesn’t take away from us.”
Netflix added 6.7 million subscribers last quarter — the largest quarterly growth in the company’s history — bringing its total user count up to 81.5 million globally, 42 percent of which is outside the U.S. Netflix also added 2.2 million U.S. subscribers — about the same clip as in Q1 2015 and Q1 2014 — which beat analysts expectations for around 1.75 million.
Netflix Subscribers, Q1 (millions):
2016: 81.50M
2015: 62.27M
2014: 48.35M
2013: 36.31M
2012: 26.48M
2011: 23.60M— Jon Erlichman (@JonErlichman) April 18, 2016
Though it did beat earnings expectations, the company missed slightly on revenue. And investors weren’t happy with the company’s outlook for Q2, as shares dove nearly 15 percent in after-hours trading Monday. Netflix, which announced a huge global expansion in January to 130 countries, said it expects to add 2.5 million subscribers globally next quarter and 2 million of those internationally, which is about 1 million lower than what analysts were expecting.
Netflix said the weakened Q2 forecast for international subscriber growth is partly due to a slowdown in the Australia/New Zealand market. It could also be a result of Netflix recently upping the price of its standard streaming service for long-time subscribers from $7.99 per month to $9.99, which will go into effect later this year. The company noted that its Q2 predictions take into account “a modest impact from the beginning of ungrandfathering.”
Some analysts think Hastings and Netflix should be a concerned about Amazon’s new $8.99 per month offering, particuarly as Amazon continues to invest in its original programming and licensing deals.
“While we don’t expect a significant number of current Netflix customers to defect to Amazon Instant Video, it is likely that Amazon and Netflix will divide the remaining uncommitted market on a roughly equal basis, severely impacting Netflix’s continued domestic growth,” analysts from Wedbush noted Monday.
Hastings, who noted that Netflix’s revenue is approaching a 50/50 split from domestic and international streams, repeated that his company is focused on growing around the globe, particuarly with its original programming.
“We’re very confident that in the long term, everybody is going to be watching TV shows and movies over the internet,” he said. “We hope to be one of the leading brands for that around the world.”