Netflix has announced its latest quarterly financial results for April to June and added 2.7 million subscribers around the globe. However, following a price hike, it lost 126,000 subscribers in the US. This was considered a bad result from Wall Street, who had been expecting a similar number to this time last year, when Netflix added over 5 million subscribers in the same quarter. This news set Netflix’s stock crashing down more than 10%.
There could be many factors to the slowdown at Netflix, they believe the content slate drove less growth and wasn’t down to competition, since there wasn’t any change in the marketplace. Obviously this will be different in the Fall when Disney+ launches and in the spring when HBO Max is released.
In an open letter to investors, Netflix CEO called out Disney+
Over the next 12 months, Disney, Apple, WarnerMedia, NBCU and others are joining Hulu, Amazon, BBC, Hotstar, YouTube, Netflix, and many others in offering streaming entertainment. The competition for winning consumers’ relaxation time is fierce for all companies and great for consumers. The innovation of streaming services is also drawing consumers to shift more and more from linear television to streaming entertainment. If you watch Our Planet on a new TV with Dolby Vision or HDR10, you will see why: the quality of streaming television is spectacular. In the US, our most developed market, we still only earn about 10% of consumers’ television time, and less of their mobile screen time, so we have much room for growth.
We, like HBO, are advertising free. That remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false. We believe we will have a more valuable business in the long term by staying out of competing for ad revenue and instead entirely focusing on competing for viewer satisfaction.
Netflix is expecting a bigger number of new subscribers in the next quarter, since the third season of “Stranger Things” will have given them a huge spike.
There is much speculation over how Netflix is going to react when there are new major competitors in the market from Disney, Warner and Comcast, especially with all the news of that content such as Friends and “The Office” being removed shortly.
The Netflix CEO addressed the removal of content in its statement:
We’ve been moving our content from semi-exclusive catalog and 2nd-window unbranded content to branded exclusive 1st window original content for many years. Much of our domestic, and eventually global, Disney catalog, as well as Friends, The Office, and some other licensed content will wind down over the coming years, freeing up budget for more original content. We don’t have material viewing concentration as even our largest titles (that are watched by millions of members) account for only alow 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.
Content is going to be a battle between the streaming services, both in terms of new and old, but Disney+ does have an edge with its price point. But there will be a higher limit to how many subscription services people will pay for. Netflix’s recent price hike and with HBO Max expected to launch closer to $15/17 a month, Disney+ will look more inviting. Hulu is playing both sides, since it offers a cheaper alternative with ads and a higher priced ad free model.
Do you think Netflix can continue to grow its subscribers?