So much ink has been spilled about Netflix's (NASDAQ:NFLX) prospects in a world of increasing video-streaming competition from the likes of Disney (NYSE:DIS), Apple (NASDAQ:AAPL), AT&T's HBO Max, Comcast's Peacock, and others. Two of those competing services have launched so far: Apple TV+ debuted on Nov. 1 and Disney+ followed on Nov. 12. We won't know what impact they had on Netflix's subscriber numbers until the company reports its fourth-quarter earnings on Jan. 21, but we have three strong indications about how subscriber trends have fared since those competing services launched.
The Dealbook conference
The first clue was dropped by Netflix CEO Reed Hastings, who was interviewed by Andrew Ross Sorkin at The New York Times Dealbook conference in New York on Nov. 6 -- just days after the debut of Apple TV+. Regarding the new services, Hastings said, "It will be some more competition for us but we've already got a lot of competition. And most of it is people will watch less linear TV and now watch, say, Disney content on the Disney+ service."
If the recent launch of Apple TV+ had had a dramatic impact on Netflix's subscriber numbers, it's unlikely Hastings would have been so nonchalant about the competition. So that's one clue it's business as usual for the streaming pioneer. The executive went on to explain why the real competitive measurement between these services won't be revenue or subscribers, but time spent on the service:
In terms of subscribing, people will subscribe to a couple [streaming] services the way they subscribe to a couple news services. But then in terms of time, that's the real competition. The tricky thing in this streaming war is Apple and Disney are not going to break out revenue for their service. You'll hear subscriber numbers but [they] can just bundle things in so that's not going to be that relevant. So the real measurement will be time. How do consumers vote with their evenings? And do they end up watching what mix of all the services? So starting in Q1 [of 2020], we'll start to see a breakout of that from Nielsen and others.
Comments about Netflix's internal data leaked to Bloomberg
The second clue, and perhaps the most direct one, was in a Bloomberg story by Lucas Shaw that was published on Nov. 22. In it, Shaw wrote: "Netflix's internal data suggests the streaming giant hasn't been hurt yet by the launch of rival services from Walt Disney Co. and Apple, Inc. according to a person briefed on its subscriber information. The number of customers canceling Netflix hasn't accelerated around the debut of those services, said the person, who asked not to be identified because the company's so-called subscriber churn is proprietary information."
Some might wonder about the reliability of an anonymous person "briefed on its subscriber information," but my guess is this was an intentional leak by Netflix's management team, which wanted to give a one-off piece of information to the investment community without getting into the habit of providing official midquarter subscriber updates. If this information were incorrect, I think Netflix would have put out a statement that saying it was not responsible for this unauthorized leak and no one should rely on information disclosed by third parties. The company didn't do that. So I think that's a rock-solid clue that subscriber trends are holding steady at Netflix.
Ted Sarandos' comments at the UBS conference
The third major clue was given by Netflix's chief content officer, Ted Sarandos, who was interviewed at the UBS Global Technology, Media, and Telecom conference on Dec. 10. He predicted that "nothing dramatic is going to happen" in regards to Netflix subscribers. "We are executing on exactly what we set out to do under the exact same strategy and the exact same wins and losses as we were before," Sarandos said.
Given those comments were made roughly a month after Apple TV+ and Disney+ debuted, I think it's safe to say there's been no meaningful impact. Sarandos didn't have to make that comment. If Netflix had been seeing an impact from the competition, he would have probably made some other comment like, "Subscriber numbers are going to ebb and flow for a variety of reasons like our content slate, the timing of price increases, competitive launches, and other things. We're just focused on creating content our subscribers love and letting our subscriber number take care of itself." But, of course, he didn't say that.
Given these three clues, I think investors should assume Netflix's fourth-quarter subscriber numbers haven't been meaningfully affected by Apple and Disney entering the streaming space. We'll find out for sure when Netflix reports fourth-quarter results on Jan. 21.