Netflix Acknowledges TikTok As A Competitor As Subscriber Growth Slows; Free Promo Coming To India

Netflix has released its earnings report for the latest quarter, and despite the pandemic still keep people at home, user growth slowed down compared to previous financial periods. To help improve matters, Netflix has also confirmed a new promotion where anyone can watch Netflix's content for free, but it appears this promotion may only be available in India.

Netflix added 2.2 million paid subscribers during the quarter, which is down sharply from 10.09 million subscribers added in the previous quarter and below Q3 2019, when Netflix got 6.8 million people to sign up for the streaming service. Netflix said it expected this downturn, and it pointed out that, for the first nine months of 2020, the company added 28.1 million paid memberships. For comparison, that number is greater than the total number of new subscribers for all of 2019 (27.8 million).

"In these challenging times, we're dedicated to serving our members," Netflix said.

To encourage more people to sign up, Netflix also has confirmed a new promo called Stream Fest. According to Protocol, this will be a 48-hour event starting on December 4 where anyone can watch Netflix's library of content for free. This promo comes just after Netflix stopped giving out free trials in the US. In the Netflix earnings interview, executive Greg Peters said this promo may only be available in India.

"An idea that we're excited about, and we'll see how it goes, but we think giving everyone in a country access to Netflix for free, for a weekend, could be a great way to expose a bunch of new people to the amazing stories that we have, the service, how the service works," Peter said. "Really create an event. And hopefully get a bunch of those folks to sign up. So we're going to try that in India and we'll see how that goes."

The full details on the Stream Fest promotion have not been announced yet, but we'll report back with more details when they're made available.

Netflix now has a total 195.15 million paid subscribers globally, which represents year-over-year growth of 23.3 percent. Looking ahead, Netflix is expecting to add 6 million more paid subscribers during the current quarter, which would put the company above 200 million subscribers. If Netflix can achieve its targets, it would add 34 million paid subscribers in 2020 to set a new yearly record for new subscribers. The previous yearly record came in 2018 when Netflix added 28.6 million paid subscribers worldwide.

"The state of the pandemic and its impact continues to make projections very uncertain, but as the world hopefully recovers in 2021, we would expect that our growth will revert back to levels similar to pre-COVID. In turn, we expect paid net adds are likely to be down year over year in the first half of 2021 as compared to the big spike in paid net adds we experienced in the first half of 2020," Netflix said. "We continue to view quarter-to-quarter fluctuations in paid net adds as not that meaningful in the context of the long run adoption of internet entertainment, which we believe is still early and should provide us with many years of strong future growth as we continue to improve our service."

The biggest driver of growth for Netflix subscribers in Q3 came from the APAC region, representing 46 percent of the total new subscribers. APAC's revenue, correspondingly, rose by 66 percent.

"We're pleased with the progress we’re making in this region and, in particular, that we've achieved double digit penetration of broadband homes in both South Korea and Japan," Netflix said. "While this is encouraging, we still have much work to do and we're working hard to replicate this success in India and other countries."

In terms of dollars, Netflix brought in $6.4 billion in revenue during the latest period and made $790 million in profit, so times are good over there.

Finally, this was the first quarter where Netflix mentioned the viral app TikTok in its section about competing companies. "Linear television and other big categories of entertainment, like video games and user generated content from YouTube and TikTok are all vying for consumers' attention and are strong drivers of screen time usage," Netflix said. "We remain quite small relative to overall screen time."

During the past quarter, Comcast launched its own streaming service, Peacock, which came after HBO Max and Disney+ premiered earlier, all of which are competitors to Netflix. Netflix management also commented on Disney's recent management shakeup to further lead into streaming, and Netflix said it is "thrilled to be competing with Disney and a growing number of other players to entertain people."