vacancies advertise contact news tip The Vault
facebook rss twitter

Have we reached peak Netflix?

by Mark Tyson on 17 July 2018, 12:41

Tags: Netflix

Quick Link: HEXUS.net/qadvmo

Add to My Vault: x

Netflix shares have taken a tumble in afterhours trading in the wake of the publication of its second quarter earnings. As usual, the data that resulted in the significant share price action overnight was evidence of some difference between actuality and investor expectations. This time, for Netflix, it was a negative - membership growth seems to have stalled.

13 per cent down in after hours trading

In its trying-hard-to-be-positive letter (PDF) to shareholders, Netflix said that it had "a strong but not stellar Q2, ending with 130 million memberships". Unfortunately it had added 5.2 million new members, the same as in Q2 last year, and a significant double digit percentage lower than the expected 6.2 million new members. CNBC explains that "domestic additions were only a little more than half of its projections, while it just added 4.5 million subscribers internationally".

Bullet pointed highlights of the recent Netflix results are as follows:

  • Revenue: $3.91 billion vs. $3.94 billion estimated, according to a Thomson Reuters consensus estimate.
  • Domestic subscriber additions: 674,000 vs. 1.23 million subscribers estimated, per FactSet and Street Account
  • International subscriber additions: 4.47 million subscribers vs. 5.11 million subscribers estimated, per FactSet and Street Account
  • Earnings per share of 85 cents

There seems to be a number of things at play, most of which could have negative impacts on the progress of Netflix. First of all streaming services could be approaching saturation point for now. Secondly, there are more streaming competitors than ever and some, with plenty of resources, are pushing harder for subscribers using special offers and cross promotions (think about Apple, Google/YouTube, Sky, Amazon and others). Thirdly, it is pretty easy to chop and change streaming providers and some say the Netflix formula for content, and even its own shows, is getting stale.

One mediocre quarter doesn't set a bad trend in stone. The BBC report on this news suggests investors don't lose their heads, especially as Q2's results come in the wake of "two extremely strong quarters of comfortably beating expectations on adding subscribers." Some seasonality is probably at play here too.



HEXUS Forums :: 20 Comments

Login with Forum Account

Don't have an account? Register today!
Netflix suffers from the same issue that has plagued content providers for a while: Fragmentation of the market through greed.

Everyone wants a slice of the pie and they all want a hefty profit margin on it, we saw it with the football rights, we saw it with F1, we are seeing it with PC gaming and now we are seeing it with streaming services.
Because of this, their price keeps going up while the amount of relevant content decreases.

These companies need to realise there is only so much money to go around and fracturing a market just makes it more expensive for us, to the point where we say enough is enough and look for alternative means of getting the content…..
Perhaps more audiences have noticed how ‘woke’ Netflix has been getting as they've been growing in size. Companies tend to start haemorrhaging customers and potential customers when they go that way.
aidanjt
Perhaps more audiences have noticed how ‘woke’ Netflix has been getting as they've been growing in size. Companies tend to start haemorrhaging customers and potential customers when they go that way.
They aren't haemorrhaging customers, they're just growing more slowly. Surely the most likely reasons are that what has till now been a new market (IP TV) is becoming established and thus there are less unreached customers to convert combined with increased competition from Amazon etc.

I've no idea what woke means in this context though.
aidanjt
Perhaps more audiences have noticed how ‘woke’ Netflix has been getting as they've been growing in size. Companies tend to start haemorrhaging customers and potential customers when they go that way.

I'm certainly not bothering with them until they go back to seeing child pr0n as not a subject for broadcast and stop being so stupid with their…. “wokeness”.
spacein_vader
I've no idea what woke means in this context though.

They fired a high ranking employee for a series of events: using an offensive word during a meeting about… offensive words, then NOT referring to the event during a meeting with employees and then using the same word again during a meeting with HR about the use of the word.