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Netflix’s Revenue Misses Q4 Expectations but Rises YoY

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Jan. 18 2019, Updated 5:00 p.m. ET

Netflix’s revenue

Netflix (NFLX) has been delivering robust revenues for the past five years. The online streaming giant posted an impressive YoY (year-over-year) revenue rise in the fourth quarter but missed analysts’ expectations despite solid growth in its subscriber additions. Netflix is also facing increasing competition from over-the-top streaming services, including Alphabet’s (GOOGL) YouTube, Amazon’s (AMZN) Prime Video, Hulu, and AT&T’s (T) HBO Now.

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Netflix’s revenue (including its DVD revenue) of $4.187 billion slightly missed analysts’ consensus estimate of $4.200 billion in the fourth quarter, but it surged ~27.4% YoY on the back of strong subscriber growth. In the first quarter of 2019, Netflix expects its revenue to rise 21.4% YoY to ~$4.494 billion. Analysts have, however, estimated revenue of $4.538 billion for the company in the period.

Streaming revenue 

Netflix’s streaming revenue reached $4.102 billion, up ~29% YoY, in the fourth quarter. However, its growth rate has fallen from the 36% YoY growth it saw in the third quarter, the 42.8% YoY growth it saw in the second quarter, and the 43.2% YoY growth it saw in the first quarter.

Netflix’s ASP (average selling price) saw a 3% rise in the quarter, but it was substantially down from previous quarters. In the third quarter, the company’s ASP rose 8%, while in the second quarter, its ASP rose 14%. Excluding foreign currency headwinds, the company’s international ASP increased 6% in the fourth quarter.

The company managed to achieve 26% growth in its average paid streaming memberships in the quarter, up from 25% growth in the previous quarter.

Hike in subscription prices

One day before Netflix reported its disappointing fourth-quarter revenue numbers, the company announced that it would be raising the prices of its monthly subscriptions by 13%–18% across the board. As a result, Netflix’s most basic plan increased from $8 to $9 per month, while its most popular plan jumped from $11 to $13. Netflix’s premium plan rose from $14 to $16 per month. In comparison, HBO Now is available for $14.99 per month, while Hulu’s ad-free service has a price tag of $11.99.

The price hike is expected to generate revenue for the company and help it pay off its debt as it aggressively spends on new content.

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