Netflix Earnings Preview: Will Price Hikes Dent Subscriber Growth?

What to keep an eye on when streaming giant reports its first quarter earnings on Tuesday

It can seem like the same old song and dance with Netflix when it comes to earnings: If the streaming giant beats Wall Street estimates on new subscribers, its stock pops — and if it misses on projections, it slumps.

We saw this earlier in the year. Netflix reported a company-record 8.8 million new subscribers were added during the fourth quarter of 2018 but still failed to meet analyst estimates, leading to a stock drop in the immediate aftermath. Netflix has essentially canceled out its late-January swoon in the last two months, with shares trading at about $349 per share heading into Tuesday afternoon, when the company will report its Q1 financials.

Despite the trend, there’s still plenty to keep your eyes on beyond overall subscriber growth. Let’s go through three quick areas of interest that we’ll be focused on when Netflix reports on Tuesday.

1. Were subscribers scared away by price hikes? 

This will be the first time we get a look at Netflix’s subscriber count since the company raised fees in January, with its standard package moving from $10.99 to $12.99 per month, and its highest-tier package, which includes up to four HD streams, now running $15.99 per month.

The price increases impacted Netflix subscribers in the U.S., as well as Latin American and Caribbean countries where Netflix bills customers in U.S. dollars, including Barbados, Uruguay and Belize. With Netflix already pushing towards a saturation point at home, with about 60 million U.S. subscribers at the end of 2018, we’ll see if the hikes stifled its already slowing growth in America.

The price hikes came less than two years after Netflix last increased its fees, but the smart money is on the increases scaring away few subscribers; Ampere analyst Toby Holleran told TheWrap last month their research suggests Netflix wouldn’t see signs of an American subscriber revolt as long as it remains under $20 per month.

2. How’s India growth look? 

Netflix chief Reed Hastings said last year the “next 100 million [subscribers] for us is coming from India.”

But Netflix so far has been reticent to share many details on how its India expansion is going. That might change soon, though, with Disney last week preemptively laying down the streaming gauntlet by revealing Hotstar, its India-based paid streaming service, has 300 million subscribers. Netflix has increasingly focused on adding international subscribers in the last two years, including in India, where it released multiple local titles last year.

But investors are still largely in the dark on how its local efforts are playing out on a country-by-country basis. Now would be a good time for Netflix to give its investors some guidance on how its doing in a booming — and competitive — market like India.

3. More data on originals? 

Netflix has also been notoriously protective of its data, especially when it comes to how its original programming performs. The company understandably thumps its chest when its major releases perform well — “Bird Box” pulled in 26 million views in its first week after its December release, for example — but it offers little insight into the decision making behind the shows it cancels.

So far, Netflix has dropped a handful of shows this year, including “Nightflyers” and “Friends From College,” starring Keegan Michael Key.

Netflix’s earnings calls are typically underwhelming, even by earnings-call standards, with a chosen analyst lobbing softball questions at company execs. It would be good, for a change, to hear what Netflix has learned from the shows it doesn’t bring back and how that applies to the content it green lights moving forward.

And the viewership performance of Netflix’s originals is particularly relevant since the company will soon need to decide whether it continues to spend big money to keep classic shows like “Friends” and “The Office” on its service.

Sean Burch

Sean Burch

Tech reporter • • @seanb44 

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