Netflix stock suffers as it sees first decline in US subscribers since 2011

18 Jul 2019170 Views

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Image: kamachi/Depositphotos

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The latest earnings report from Netflix, which reported a subscriber loss in the US, sent the company’s stock tumbling.

Netflix investors may find themselves a bit nervous after the latest earnings report from the streaming giant. The report shows that overall subscriber growth of 2.7m was 46pc shy of the projected growth it indicated last quarter.

The release also confirmed that Netflix lost subscribers in the US – 126,000 to be exact – for the first time since 2011. It now has 60.1m US-based paid subscribers. As a result, the company’s share price tumbled by 11pc to roughly $323 in pre-market US trading.

CEO Reed Hastings argued that as the company has grown in the past few years, these kinds of vicissitudes are not as relevant as some may make them out to be. He said: “It’s easy to overinterpret the quarter membership ads, which are a bit noisy at the moment. So for the most part, we’re just executing forward.”

The company, however, expects to make a swift recovery in Q3, with the third-season premiere of popular nostalgic sci-fi series Stranger Things potentially providing a boon to engagement.

An increasingly crowded market

In a letter to shareholders, Hastings also noted that while the missed forecast was across all regions, it was slightly more so in regions that experienced price increases. He maintained that competition wasn’t a factor, but rather the content was.

“We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2, and competitive intensity and our penetration is varied across regions … Rather, we think Q2’s content slate drove less growth in paid net adds than we anticipated.”

Nevertheless, the shareholder declaration goes on to make reference to Disney, Apple, WarnerMedia and NBCU, all of which are due to enter the increasingly crowded, and therefore competitive, streaming space in the next 12 months.

The company also noted that it, like HBO, is advertising-free, something it has no intention of changing any time soon. “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 app on Laptop screen. Image: kamachi/Depositphotos

Eva Short is a Journalist at Siliconrepublic.com

editorial@siliconrepublic.com