Netflix is banking on the return of dramas Stranger Things and Orange Is the New Black plus Martin Scorsese’s movie The Irishman to increase subscriptions markedly.
Shares in Netflix Inc. fell 13% after the subscription streaming service reported a drop in US subscribers and slower than forecast growth overseas.
The shock announcement – Netflix signed up 2.8 million subscribers internationally which was about half of the level predicted – comes as new streaming service providers Walt Disney Co. and Apple Inc. launch this year and Comcast Corp. and AT&T Inc. next year.
Netflix is also losing its two of its most popular shows Friends and The Office.
“We saw a preview of next year with this quarter,” Michael Pachter, an analyst with Wedbush Securities, said in an interview with Bloomberg Television. “Next year, they’ll have a couple of quarters where they’ll lose subscribers.”
However Netflix CEO Reed Hastings was upbeat after the second quarter earnings were made public and welcomed the new competition.
“Our product has never been in better shape,” said Netflix CEO Reed Hastings. Photo: Wikimedia commons
“Our position is excellent,” Hastings said during the company’s earnings call. “We’re building amazing capacity for content. Our product has never been in better shape.”
Hastings also welcomed the new competitors coming on board.
“The advantage of having something be catchy like ‘the streaming wars’ is that it draws more attention, and because of that, consumers shift more quickly from linear TV to streaming TV,” Hastings said during the company’s earnings call.
“I think everybody gets that people will subscribe to multiple (platforms). I’d wager that most Netflix employees are HBO subscribers. We love the content they do and that spurs us on to want to be even better.
“Competition grows the industry,” added Hastings.
The major streaming company reported the loss of 130,000 customers in the US and blamed higher subscription prices and a weak line-up of programs.
It said the second quarter has typically been its weakest time of the year – the company missing its forecast in three of the past four years.
Netflix said it expected to add seven million subscribers in the current quarter, partly due to the return of dramas Stranger Things, Orange Is the New Black, The Crown and Martin Scorsese’s movie The Irishman.
Netflix spent US$594 million more than it received in income. It spent more than US$3 billion on programming in the quarter and US$600 million on marketing. The company spent US$594 million more than it took in and will need to raise money to fund programming.
Despite the poor second quarter result, Netflix‘s stock had rose 35% for the year, doubled the gain of the S&P 500.