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Netflix Stock Drops As Subscriber Growth Decreases

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Netflix Inc. recently experienced a plunge in its stock rates after losing 126,000 paid subscribers in the United States. This is far from the expected 300,000 subscribers predicted for the second quarter.

 

They, on Wednesday, experienced this 12% decrease in after-hours trading. The company added 2.7 million new subscribers in the second quarter of 2019. However, it is just over half of the five million subscribers that analysts expected.

 

netflix-stock-drops-as-subscriber-growth-decreases

 

In January 2019, the streaming juggernaut announced it was raising its rates by anywhere from 13% to 18%. Although this prediction depended on the subscription plan, they did not expect the sudden. This will be the first time in 12 years since it started its digital services that the leader in the streaming would lose domestic streaming customers.

 

New York Times reports that the chief executive, Reed Hastings, brushed it off stating, “Our position is excellent.” He said this on a call with analysts after they released the report.

 

The sudden drop in stock rates resulted from the loss of subscribers. This, in turn, evolved from the increase in subscription fees. Prior to the current rate at $13, Netflix subscription was $8. Probably, the users decided it wasn’t worth it.

 

In its letter to shareholders, Netflix revealed that the blame was on the subscriber miss.

 

They stated it was on a trio of factors: price increases, a weak Q2 content line-up, and its unexpectedly strong Q1 subscriber uptake.

 

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“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,” Netflix said. “Rather, we think Q2’s content slate drove less growth in paid net ads than we anticipated.”

 

However, there is competition from other streaming companies. They include Big Tech, Big Media, H20, Disney (which will debut Disney+ on November 12 in North America) and several others. They have a deeper library of films and also the same films that Netflix initially reigned supreme in.

 

Beyond Netflix, other sources also strean their most popular content. This includes shows from Marvel Studios, Stranger Things and the Star Wars series. This may topple the subscription in the next quarter even though analysts predict a seven million user subscription.

 

They base the prediction on the library of new shows expected to stream in the third quarter.

 

The shows include “Stranger Things,” the final season of “Orange Is the New Black”, and a new season of “The Crown.” Unfortunately, Netflix will also lose its two popular shows: “The Office” and “Friends.”

 

Meanwhile, Disney’s monthly subscription fee, at $6.99, is half of what Netflix charges. They, therefore, estimate 60 to 90 million subscribers by the end of the fiscal year 2024.

 

HBO Max also announced that it will also be the only place to stream “The Fresh Prince of Bel Air,” “Pretty Little Liars” and “Friends.” This may attract several subscribers. However, there have been no signs as to the cost of the subscription.

 

To give it an edge over its competitors, Netflix uses its advertising-free model that other streaming services cannot boast of. However, this may attract a few brands who want to advertise on the streaming service.

 

Meanwhile, Netflix remains the nation’s largest Internet television network and now has 151.5 million subscribers globally.

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