Netflix reported slower growth than expected for the second quarter, which could spell trouble for the streaming giant amid the threat of more competition from major media companies like Disney and WarnerMedia. Netflix’s paid memberships grew by 2.7 million from April to June. But that’s less than half of the 5.5 million it added during the same period last year. In fact, it lost around 130,000 subscribers in the U.S., where it has more market penetration.
The company, which now has just over 151 million total paid members, had projected additions of 5 million during the period and Wall Street, per FactSet, was expecting 5.1 million new subscribers. The result? Investors sent the stock down more than 10 percent after the market close on the disappointing subscriber growth. Netflix says its subscriber miss occurred across all regions, but slightly more in areas where its price increase went into effect. Netflix announced in January that its plans would go up in price starting with the May billing cycle.
Its standard plan now costs $13 per month in the U.S. The company adds that competition wasn’t a factor, especially since many of the biggest competitors, including HBO Max and Disney+, have yet to launch. Instead, original programming released during the second quarter — including ‘Dead to Me,’ ‘When They See Us,’ ‘Murder Mystery’ and ‘Always Be My Maybe’ — failed to drive growth.
It’s not that the shows weren’t watched by subscribers. But that they didn’t entice new subscribers to hand over their credit card information. CEO Reed Hastings said, “There was no one thing” that caused the miss, chalking it up, in part, to bad projections. The third quarter, which began in July, kicked off with the return of ‘Stranger Things,’ and Netflix said the first two weeks have been “strong.”
It is projecting that it will add 7 million new subscribers during the third quarter. ‘The Crown’ and the final season of ‘Orange Is the New Black should also contribute to the second half of the year. After years of selling their biggest hits to Netflix, Hollywood studios have cooled on the company.
Disney, NBCUniversal, and WarnerMedia are all expected to launch their own streaming services within the next year. In its note to shareholders, Netflix acknowledged the pending loss of titles like ‘Friends’ and ‘The Office.’
“We don’t have material viewing concentration as even our largest title (that are watched by millions of members) account for only a low single digit percentage of streaming hours.”
“From what we’ve seen in the past when we drop strong catalog content (Starz and Epix with Sony, Disney, and Paramount films, or 2nd run series from Fox, for example), our members shift over to enjoying our other great content.”