Facing increased pressure from new, deep-pocketed competitors in the U.S., Netflix is looking abroad for more growth opportunities as it faces a continued slowdown of domestic subscriber increases.
In the fourth quarter, Netflix added 42,000 new subscribers in the U.S. (55,000 including Canada)—to just over 61 million in total—and acknowledged it is facing increased subscriber churn rates. In a letter to shareholders today, Netflix acknowledged that “recent price changes” and “competitive launches” domestically were affecting U.S. growth rates—referring to its price hikes last May and the rollout of new services like Disney+ and Apple TV+—but the company pointed to robust viewership of its newest originals as proof it is continuing to break through.
Outside of the U.S., the picture for Netflix is far rosier. In the fourth quarter, the company netted 8.3 million new international subscribers; for the first time, the company exceeded 100 million memberships outside the U.S., with 106 million international customers and a total of 167.1 million global subscribers.
“Streaming entertainment is a global phenomenon and we’re working hard to build our early progress,” the company said in its letter to shareholders.
As is typical for Netflix’s earnings releases, the streaming service shared select data about the performance of some of its originals. The fantasy series The Witcher was watched by 76 million households in the first four weeks of the show’s availability on Netflix, putting it on track to be the service’s biggest Season 1 release ever, the company said.
Netflix also dropped other impressive-sounding metrics, including a projection that 54 million households will watch the second season of the thriller You (the first season of which aired on Lifetime) within the first four weeks of the season’s availability on the service. 6 Underground, an action movie from Michael Bay that starred Ryan Reynolds, drew 83 million household views within four weeks.
However, Netflix has made a major change to the way it measures viewership in a way that will substantially inflate its future viewership numbers. The company said it is no longer counting views as when 70% of an episode or movie is viewed, as had been its previous metric.
Instead, it will define a view as when a household watches just two minutes of a program. Netflix estimated this will inflate its viewership metrics by about 35%. That two-minute mark, for reference, represents less than 1% of Martin Scorsese’s Netflix original film The Irishman, which has a run time of 209 minutes. (Notably, Netflix did not spin out viewership numbers for The Irishman in its shareholders letter.)
Netflix is fighting off a new wave of deep-pocketed competitors that are also looking to capitalize on shifting consumer habits. In addition to Disney+, Apple TV+ and Amazon Prime Video, Comcast-owned NBCUniversal will debut the primarily ad-supported streaming service Peacock nationally in July, and AT&T-owned WarnerMedia is readying the May debut of its own streaming service, HBO Max.
Those new rivals, though, have been met by a shrug from Netflix. Last quarter, CEO Reed Hastings said the new entrants were “fundamentally more of the same.” In this quarter’s shareholders letter, Netflix said its viewing-per-membership grew despite Disney+’s and Apple TV+’s entrance to the market. Citing Google search trends, Netflix also pitted its popular Witcher program against big title debuts on other services, including Disney+’s show The Mandalorian, Apple TV+’s drama The Morning show and Amazon Studios’ original Jack Ryan, to show The Witcher’s popularity.
“We have a big head start in streaming and will work to build on that by focusing on the same thing we have focused on for the past 22 years—pleasing members,” the company wrote in the letter. “We believe if we do that well, Netflix will continue to prosper.”
Last quarter, Netflix said it planned to spend $15 billion on original programming in 2019, and while U.S. originals are generally the buzziest, local originals are big drivers for international growth, too. The company said it will invest heavily in Korean originals to drive international growth and will continue determining the best business offerings in different regions, like mobile-only plans in countries like India, Malaysia and Indonesia.