Anirban Roy Choudhury

"Sacred Games S2 our most-watched show in India": Netflix

California-headquartered global streaming giant Netflix in Q3, said it grew to $5.2 billion in revenue, up 31 per cent over the prior year. In a letter to its shareholders, it mentioned that its operating income doubled to $1 billion while paid net additions totalled $6.8 million below its $7 million (m) forecast.

In Q3’19, average streaming paid memberships and ARPU grew 22 per cent and 9 per cent year-over-year, respectively. “Excluding a -$137m year-over-year impact from F/X, consolidated revenue growth was 35 per cent, while streaming ARPU growth was 12 per cent. Operating margin of 18.7 per cent (up 670 bps year-over-year) was above our guidance due to timing of content and marketing spend, which will be more weighted to Q4’19,” Netflix informed its shareholders.

Its international paid net additions totalled $6.3m in Q3, which the company said is a 23 per cent increase vs. $5.1m in the year-ago quarter. “We’re making strides in our key markets and, while we have much more work to do in Asia in the coming years, we are seeing encouraging signs of progress,” read Netflix's letter to shareholders.

For Q4, Netflix said it is expecting consolidated revenue to increase 30 per cent year-over-year with 9 per cent streaming ARPU growth. It is forecasting $7.6m global paid net adds (vs. $8.8m last Q4), with $0.6m in the US and $7.0m for the international segment. This implies full-year 2019 paid net adds of $26.7m, down from $28.6m last year. “While we had previously expected 2019 paid net adds to be up year-over-year, our current forecast reflects several factors including less precision in our ability to forecast the impact of our Q4 content slate, which consists of several new big IP launches (as opposed to returning seasons), the minor elevated churn in response to some price changes, and new forthcoming competition,” said Netflix.

"Sacred Games S2 our most-watched show in India": Netflix

It mentioned that it is planning to expand its non-English language original offerings as it believes that they continue to help grow the penetration in international markets. In Q3, Season 3 of La Casa de Papel (aka Money Heist) became the most-watched show on Netflix across non-English language territories with 44m households watching the new season in the first four weeks of release. Sintonia, Netflix's latest Brazilian original, it said, was the second most-watched inaugural season in Brazil.

“The Naked Director broke out as the biggest title launch for us in Japan and was also highly successful throughout Asia. Similarly, in India, we debuted the second season of Sacred Games, our most-watched show in India. To date, we have globally released 100 seasons of local language, original scripted series from 17 countries and have plans for over 130 more in 2020. We also plan to expand our investment in local language original films and unscripted series,” read the letter.

Furthermore, “To that end, we rolled out a lower-priced mobile plan in India in July and we’re pleased with the results. Our approach with pricing is to grow revenue and so far, uptake and retention on our mobile plan in India has been better than our initial testing suggested. This will allow us to invest more in Indian content to further satisfy our members. While still only a very small percentage of our total subscriber base, we’re continuing to test mobile-only plans in other markets.”

Netflix said it competes broadly for entertainment time. “This means 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 per cent of TV screen time in the US (our most mature market) and much less than that in mobile screen time.”

Moreover, “Many are focussed 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, such as Disney+, Apple TV+, HBO Max, and Peacock has increased competition, but we are all small compared to linear TV. While the new competitors have some great titles (especially catalogue titles), none have the variety, diversity and quality of new original programming that we are producing around the world.”

Starting with the Q4’19 earnings report in January 2020, Netflix plans to disclose revenue and membership by region. Its four regions are Asia Pacific (APAC), Europe, Middle East and Africa (EMEA), Latin America (LATAM), and the US and Canada (UCAN). UCAN is roughly 90 per cent US and 10 per cent Canada.

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