"Increased Competition with Latecomers... Netflix Subscriber Growth Stagnation (Comprehensive)"

(Photo by MarketWatch)

The world's number one online video service (OTT) provider Netflix continued to experience stagnation in new subscriber growth in the fourth quarter. This is due to the disappearance of the COVID-19-driven boom and weakening dominance caused by the expansion of latecomers.

According to Netflix IR materials on the 20th (local time), Netflix's earnings per share in the fourth quarter of last year were $1.33, significantly below Wall Street's expected $0.82. Revenue for the same period was $7.7932 billion, a 16% increase from $6.64444 billion in the same quarter last year, but it remained at the market expectation level. Net income rose 12% from $542.2 million to $607.43 million.

Netflix's global new subscriber count in the fourth quarter of last year was 8.28 million. This figure is even lower than the 8.3 million in the same period last year and below the company's guidance of 8.5 million. Although the number of subscribers decreased, revenue and profit increased thanks to subscription fee hikes.

The company's management expects the stagnation in subscriber growth to continue this year as well, following last year. In a letter to shareholders, Netflix stated, "We slightly overestimated the increase in paid subscribers in the fourth quarter," and added, "Competition with latecomers is intensifying, which may affect future growth."

Netflix's forecast for first-quarter subscriber growth released on the same day was 2.5 million, below 3.98 million in the same period last year. This is less than half of Wall Street's expected 5.9 million.

Due to the outlook for stagnant subscriber growth this year and poor performance, Netflix's stock price fell more than 20% in after-hours trading.

Reed Hastings, Netflix CEO, cited the strengthening of OTT businesses by competitors such as Amazon and Hulu as a reason for the low earnings forecast during the post-earnings conference call.

CNBC analyzed, "With the reopening of the economy after COVID-19, outdoor activities have increased again, reducing demand, and delays in content production have decreased exclusive content acquisition, leading to a loss of market dominance."

The end of the COVID-19 boom and intensified competition among OTT providers are shaking the market landscape, which is affecting the sharp decline in subscriber numbers.

Latecomers armed with mergers and acquisitions (M&A) and independent studio operations, such as Amazon Prime Video and Disney+, are rapidly expanding their presence based on exclusive content, weakening Netflix's dominance that has lasted for over a decade.

However, there is also anticipation for new business ventures. Netflix is expanding into new areas such as mobile gaming and consumer goods as a breakthrough to overcome growth stagnation. To this end, Netflix recruited Mike Verdu, formerly of Electronic Arts (EA) and Facebook, as vice president of game development last year.

Bank of America recently stated in a report, "Despite intensified competition among OTT providers, continuous growth in the Asian region and expansion into new business areas such as mobile gaming and consumer goods this year are expected to increase new subscriber numbers."

This content was produced with the assistance of AI translation services.