Netflix Inc. has been denied the expected effect of an attack on streaming competitors, but as a wave of well-funded streaming services from big-name companies is about to be released, the tone of executives has changed.
Over the years, Netflix
NFLX, + 0.71
has insisted that "there is room for more parties to have attractive offers" in streaming media and that new competitors would not "significantly impact our growth because of the transition from linear to On-demand entertainment is so massive. "At the beginning of the year, as plans for competing power services came swiftly, executives tried to change the conversation by saying," We compete with (and lose with) Fortnite more than HBO. "
As of January: Netflix thinks & # 39; Fortnite & # 39; is a bigger competitor than other streaming services
Netflix finally admitted the obvious when it reported third quarter revenue on Wednesday afternoon, though: At least in the short term, the arrival of a number of new services from companies like Apple Inc .
and Walt Disney Co.
DIS, + 0.85%
will damage the growth of the new subscriber. The company expects subscriber growth to slow year over year in the usually strong fourth quarter and for the entire year, even with a strong slate of new shows.
"The launch of these new services will be noisy," Netflix told executives in its quarterly letter to shareholders. "There may be some modest headwinds to our growth in the near term, and we have tried to factor this into our guidance."
In analysts' interview session, Netflix executives played these comments. When asked about the change in tone against the competing landscape, CFO Spencer Neumann said "inevitably there will be some curiosity and try out the new service offerings."
"Basically, it's more of the same," Netflix CEO Reed Hastings replied. "Disney is going to be a big competitor, Apple is just getting started, but they will probably have some good shows too. But again, we're all competing with linear TV. We're all small compared to linear TV."
For more: Here comes the Netflix competition, with a lot of fresh content
It sounds more like Netflix's longstanding rhetoric that it is expected to win in the long run when viewers go over a lot of a linear model of the on-demand streaming alternative that Netflix pioneered, as it has for years mentioning competitors such as Amazon Prime and Hulu, Netflix insisted that bringing more viewers into the streaming world would ultimately help it secure a bigger presence in a completely changed media environment.
"In our view, the likely outcome of launching these new services will be to accelerate the shift from linear TV to on-demand entertainment," Netflix-l wrote others, while specifically mentioning Disney +, Apple TV +, AT&T Inc.s
HBO Max and Comcast Corp. & # 39; s
Peacock streaming services. "Just like the evolution from broadcast TV to cable, these once-in-a-lifetime changes are very big and open to great new opportunities for many players."
"We did well during the first decade of streaming," executives wrote to end the "Competition" section of the quarter. "We are ready to compete to get consumers' attention and look."
Netflix shares rose almost 8% in afternoon trading after the results, so investors should not have been surprised that executives tacitly admitted the obvious. They were probably relieved that Netflix & # 39; s subscriber growth rebounded from a shocking disappointment last quarter.
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However, the company's actions can speak louder than words. In addition to withdrawing guidelines for an annual increase in new paying customers this year, Netflix said they will stop projecting US subscriber subsidies in future results, which does not bode well for growth in the largest market. Netflix – which saw domestic subscribers decline in the second quarter for the first time in eight years and come off easier than projected in Wednesday's results – will now only give global membership forecasts, a twist on Apple's hold to stop breaking iPhone sales.
It is never a good sign when companies stop providing information that they have long provided, or change the tune of the competitive landscape. In this case, however, Netflix seems to admit the obvious: The next few months at least look like they will be tough for the company's operations in the United States.