Is Netflix on track for strong international but weak domestic Q4 performance?
Ampere’s analysis of Internet search activity suggests that Netflix could be on track for a strong Q4 internationally but a weaker-than-anticipated Q4 domestically for paid subscriber net additions. In its Q3 2018 results, the streamer estimated it would see 1.5m domestic paid net additions and 6.1m international, a total of 7.6m paid net additions. Calibrating trend data with previous Netflix subscriber performance suggests that worldwide net additions for the streamer will be 7.7m in Q4 2018, which would be its second most successful quarter for net additions in history, and will bring its international paid subscriber base to 80m. However, things are less rosy for its domestic subscriber base, with a similar methodology suggesting 1.1m net paid additions, its worst Q4 performance since the company suffered net paid subscriber losses in Q4 2011. Overall, however, with this strong international growth 2018 would still be its most successful year for worldwide paid net additions to date, with a total of 27.5m.
In August, we highlighted the fact that Netflix could wipe out its 2018 free cash flow deficit by increasing monthly ARPU by $1.67. This week, the streamer announced it is hiking its domestic prices by $2 per month, marking an 18% increase on its existing standard package from $11.99 to $13.99 per month. This price increase is also earmarked for much of Latin America (excluding Mexico and Brazil). While this price increase could potentially impact Q1 results, the timing of the announcement will have no effect on its Q4 results, due to be announced tomorrow.