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Netflix predicts slower subscriber growth after record sign-ups in first quarter

  • Streaming giant Netflix added a record 9.6 million subscribers during the first quarter.
  • It expects to add just 5 million subscribers next quarter, down 8 percent from the year-earlier period.
  • The company insisted it's not worried about competition from Disney Plus, Apple and other entrants into the streaming business.

Netflix added 9.6 million subscribers during the first three months of 2019 -- its largest ever quarterly gain in viewers -- but warned investors on Tuesday that its white-hot growth rate could soon cool off. The price of Netflix shares tumbled more than 3 percent on the news. 

The streaming company expects to add just 5 million subscribers globally next quarter, down 8 percent from the 5.45 million it added during the same period a year earlier, the company said in a letter to shareholders Tuesday. 

Still, the television and streaming service reached nearly 148.9 million total paid subscribers with the new additions in the first quarter, up from almost 139.3 million at the end of 2018. Netflix said it employed the same strategy it has always followed to achieve record growth: "When we please our members, they watch more and we grow more."

But the company is less optimistic about growth for the second quarter. Netflix this month implemented price hikes in most of the countries in which it operates, testing customer loyalty, particularly as new services enter the streaming business at bargain prices. Disney last week announced its foray into streaming with Disney Plus -- whose content Netflix will no longer have access to -- for just $6.99 per month. 

Netflix still licenses shows like "Grey's Anatomy" from other studios and has also ramped up investments in its own programming to produce series like "Stranger Things."

The company said it expects highly-anticipated films, including Martin Scorsese's "The Irishman" and Michael Bay's "6 Underground," to replace any subscribers it loses to price hikes. 

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Media analysts say there is room for multiple players and the streaming space doesn't yet appear to be too crowded. "The increasing number of streaming services with high-quality, exclusive content away from the legacy multichannel bundle appears to be making it easier and easier to cut the chord. That, in turn, frees up significant wallet share that helps all SVOD services," wrote BTIG research analyst Rich Greenfield. 

Netflix also is in talks to purchase the historic Egyptian Theatre in Hollywood to allow its films to more easily compete for Academy Awards, after "Roma" director Alfonso Cuarón won Oscars for best director and best cinematographer. The Netflix-produced film also took home the award for Best Foreign Language Feature. Roma was eligible for Academy Awards because it had a short theatrical release before Oscar voting ended. Wildly popular Bird Box, on the other hand, was released direct-to-Netflix.

Netflix addressed head-on competition from new players like Apple and Disney saying on Tuesday that it is "excited to compete." The company dismissed concerns that competition would hamstring its growth, citing the mass transition to on-demand entertainment that is currently underway. 

"We believe we'll all continue to grow as we each invest more in content and improve our service and as consumers continue to migrate away from linear viewing (similar to how US cable networks collectively grew for years as viewing shifted from broadcast networks during the 1980s and 1990s)," the company said.