Netflix shares plunge as global growth falls short, U.S. customers shrink

[steven36]

(Reuters) - Netflix Inc (NFLX.O) said on Wednesday it lost U.S. streaming customers for the first time in eight years and missed targets for new subscribers overseas, an announcement that jarred investors ahead of looming competition.

 

 

Netflix shares sank nearly 12% in after-hours trading after the company posted quarterly results that showed it shed 130,000 U.S. customers from April to June.

 

The world’s dominant subscription video service said its slate of new shows during the quarter was not as appealing as expected and price increases in some markets dented growth.

 

Netflix reported that it added 2.83 million paid streaming subscribers outside the United States, below analyst expectations of 4.8 million, according to IBES data from Refinitiv. Analysts had forecast a U.S. gain of 352,000.

 

“Our missed forecast was across all regions, but slightly more so in regions with price increases,” the company said in a letter to shareholders.

 

“We think Q2’s content slate drove less growth in paid adds than we anticipated,” it said.

 

(For an interactive graphic, click here)

 

Chief Executive Reed Hastings said on a video call with analysts the company’s internal projection still showed it expected to end 2019 with more new subscribers than it added in 2018. It currently boasts 151.6 million streaming customers worldwide.

 

“I think our position is excellent,” he said.

 

Netflix has staked its future on global expansion and creating original TV shows, movies and documentaries to attract new customers and keep the existing ones paying monthly subscription fees.

 

“Even though we expected slowing user growth in the U.S., a negative paid net additions number is shocking,” said Clement Thibault, analyst at financial markets platform Investing.com.

 

“The problem is that with intensifying competition, there is no guarantee Netflix has the pricing power needed to raise prices without massively bleeding users.”

 

Netflix raised prices in Britain, Switzerland, Greece and Western Europe during the second quarter.

 

A Reuters/IPSOS poll in March found 81% of U.S. Netflix subscribers polled said they would cut the service if the monthly price rose by $5.

 

The last time Netflix lost U.S. subscribers was in 2011 following an uproar over a price hike and a plan to split its DVD-by-mail and streaming services.

 

Looking ahead, Netflix projected it would add 7 million paid streaming customers in the third quarter with help from a new season of supernatural thriller “Stranger Things,” released on July 4. That is more bullish than the 6.6 million forecast from analysts polled by Refinitiv.

 

But looming in November is the launch of Disney+, seen as a formidable entrant into the streaming market, and original programming from Apple Inc (AAPL.O). AT&T Inc (T.N) and Comcast Corp (CMCSA.O) have said they plan their own offerings next year.

 

Netflix also faces the future loss of its two most-streamed shows. “The Office” will come off Netflix in January 2021 and head to Comcast’s streaming platform, while “Friends” will end its run on Netflix at the beginning of 2020. It will move exclusively to the upcoming AT&T service HBO Max.

 

Source

[Infinite_Vision]

Netflix used to be good but after Disney pulled a lot of their characters that they own the rights to, Netflix doesn't seem to have anything good anymore.  Prices have gone up and there are competition from YouTube Tv, Hulu, and Amazon Prime for example.  Netflix doesn't have that much new movies now a day after Hollywood figured out that Netflix was making lots of money on subscriptions.  In addition, there were controversies this past year about the company leaning to much to the left,thus, alienating a good amount of their user base.  

 

This reminds in economic class.  Netflix created a new market segment when it started but as it became profitable, competitors and allies saw that it was too profitable.  So they in turn entered this new market segment.  As competition intensify, I expect Netflix share to start shrinking as more powerful competitors enter in the foray.  I don't expect Netflix to close shop but rather their share of the pie to decline a bit.  Netflix must have an entry to barrier to prevent or make it harder for their competitors to come in to this new segment.  It doesn't seem like they have any at the moment.  Original shows?  That is why Disney bought 20th Century Fox so they could have rights to more characters like in the Marvel Universe.  

[lordmaxx]

This was to be expected, and will continue. I won't be surprised if their stock price is cut in half by October. 

[Karlston]

Netflix lost US subscribers in Q2 over price hikes; how can it win them back?

Increased costs and competition make for a precarious situation at Netflix.

Enlarge / Netflix CEO Reed Hastings.

re:publica

If you’ve been grumbling about the rising cost of your Netflix account, it seems you’re not alone. Netflix shared its second-quarter financial results and the company indicated that higher prices may have led to dips in the platform’s subscriber counts.

 

Revenue for the video streaming service totaled $4.92 billion in the second quarter, up 26% year-over-year. Net income was $271 million, with $0.60 earnings per share. Both those figures were down from Q2 in 2018 and from Q1 of 2019.

 

Netflix added 2.7 million paid members during the period, a big cut from the 5 million it expected to see and from the 5.5 million recorded in the year-ago quarter. “Our missed forecast was across all regions, but slightly more so in regions with price increases,” the shareholder letter read. The company insisted that competition from other platforms was not a concern, but rather that the shows it had for the second quarter weren’t enough to inspire people to subscribe.

 

The United States remains a critical market for Netflix, and the letter said that domestic paid membership was “essentially flat” for the quarter. The actual figure for Q2 was 60.1 million paying viewers in the U.S., compared with nearly 60.23 million in Q1.

 

The results, following closely on the news that the platform would be losing the popular sitcom Friends next year, put Netflix into a slump on the market. Its stock price fell 10.3% during trading on Thursday. Even with the biggest single-day decline Netflix has posted in three years, its shares appear to be leveling off around $315 apiece today.

 

If it wants to right the ship, Netflix will need to be less cagey about the competition it will be facing in the coming years. Most of the shows it is losing will be reappearing on new rival services owned by the companies that have been making bank by licensing out their programs. The arrival of a Disney streaming service, which will cover not just the huge library of animated titles from the legendary studio and its Pixar arm, but also such pop cultural icons such as Star Wars and Marvel, should be making all video streaming services at least a little nervous. Maybe that outside competition isn’t impacting results now, but it will be next year.

 

That said, the loss of top performers such as Friends and The Office isn’t blindsiding Netflix. The company has been gearing up for this possibility for some time, investing big bucks into a massive library of original shows. Many of the projects that are unique to Netflix are excellent. If you’re a person who puts value in awards, as investors likely do, then Netflix’s 117 Emmy nominations show that there’s greatness happening on the platform. Projects like When They See Us, Russian Doll, Black Mirror: Bandersnatch, Ozark, Queer Eye, and Nailed It are winning fans and social buzz as well as nominations. Stranger Things continues to charm the 80s child in all of us, multiple original productions are giving fresh life to the rom-com genre, and any service that scores a Beyoncé exclusive is doing something right.

 

But alongside those gems are some colossal wastes of money (let us never speak of A Christmas Prince 2). For Netflix to reassure its investors, it will need to make smarter decisions on what projects it greenlights.

 

Better content choices might also soothe some of the consumer irritation over price hikes. With its current strategy, Netflix is trying to be both your local network affiliate and the boutique cable provider. It has the syndication, sitcoms, and mainstream comfort food shows that you’d get on the former lumped in with pricey prestige productions a la HBO or AMC. And until you start watching, you don’t know which type of program you’re getting.

 

Upping the overall quality of the viewing experience, even if it means not having quite so many new shows, might convince more people that Netflix is worth the cost.

 

 

 

Source: Netflix lost US subscribers in Q2 over price hikes; how can it win them back? (Ars Technica)