Netflix investors breathed a sigh of relief after yesterday’s Q3 '19 earnings report. The company missed its subscriber forecast of 7 million subscriber addition, but only narrowly by a few hundred thousand. Netflix added 500K subscribers in the U.S. vs. its 800K forecast. That was a far better performance than Q2 when it lost 130K subscribers in the U.S. Internationally Netflix gained 6.3 million subscribers, basically in line with the 6.2 million it forecast.

The U.S. miss was blamed mainly on an elevated churn rate that Netflix said hasn’t normalized since rate increases went into effect earlier this year. The good news is the higher rates translated into 16.5% increase in average revenue per unit in Q3.

The latest results make clear how different the U.S. market has become for Netflix. In Q2 and Q3 2019 combined, Netflix added around 370K subscribers. Just 2 years ago, in the same 6 month period of 2017, it added nearly 2 million. (This is also the last quarter Netflix will report U.S. results, going forward they’ll be combined with Canada, under a new regional reporting model.)

The good news is that while domestic growth was dramatically contracting, international growth has accelerated. In Q2 and Q3 2019 combined, Netflix added around 9.1 million subscribers up from 7.7 million additions in the same period of 2017 (although the 9.1 million was a bit lower than the 6 month period of 2018 which was 9.65 million).

But as we all know, whatever changes in market conditions Netflix has experienced in the past couple of years pales in comparison with what’s ahead, starting next month when Disney+ and Apple TV+ launch.

In its shareholder letter and video call, Netflix maintained its middle of the road approach when discussing the upcoming competition. On the one hand, “The launch of these new services will be noisy. There may be some modest headwind to our near-term growth…” while on the other, “But there is also a very large market opportunity; today we believe we’re less than 10% of TV screen time in the US. Our long term outlook on our business is unchanged.”

Nobody can know what the exact impact the launch of all the new SVOD services will have on Netflix’s subscriber growth - except that it will certainly decline, which Netflix has factored into its Q4 forecast. A huge wildcard is the lower rates both Disney+ and Apple TV+ will charge, especially in light of Netflix’s recent rate increases which have already driven up churn. When the full range of Disney+ content is on display, for its meager $6.99/month fee, lots of Netflix subscribers are going to be double-checking what they’ve been paying.

Net, net it is awfully hard to imagine Netflix ever again adding subscribers at the same pace as it has in the past. And once the Q4/Q1 holiday bump is over, it is conceivable that the Q2-Q3 ’20 period could bring Netflix’s first ever 6 month loss in U.S. subscribers. Forecasting Netflix is more challenging than ever.