Netflix Q2 reports first major loss of US subscribers

[Humza]

Bottom line: Netflix was off to a record breaking start in 2019 as its Q1 earnings reported addition of nearly 10 million new subscribers, but that momentum appears to have slowed down quite a bit. Despite forecasting lighter figures for Q2, new subscriber growth could only reach about half (54 percent) of the projected 5 million figure while YoY values for Q2 stood at 5.5 million for 2018 and 2.7 million for 2019.

Netflix is going to need more original hits like Stranger Things if it wants to gain (and retain) subscribers and the confidence of the company's stakeholders. In its Q2 2019 earnings report, CEO Reed Hastings started off with the good news of 26% increased revenue but followed it up with a considerable decline in new subscribers while targeting an ambitious growth of 7 million paid memberships for Q3.

"Our missed forecast was across all regions, but slightly more so in regions with price increases," said Hastings, noting that competition wasn't 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." He also cited Q2's content as the major cause, besides the price hike, for less than expected additions to paid subs.

In the US, Netflix "Paid Net Additions" for the second quarter stood at -0.13 meaning a loss of around 130,000 subscribers, the first since the 2011 split of its DVD-by-mail and streaming business, although free trial signups did see a minor increase of 20,000 users. For its Q3, it has forecast 800,000 new subscriptions while its international market saw a quarterly increase of 2.8 million new paid members, the lowest among its last four quarters.

The Q2 content which Netflix did find worth mentioning includes Dead to Me starring Christina Applegate, watched by 30 million households in its first month, and which has been renewed for a second season. When They See Us received 16 Emmy nominations and was home to 25 million views in its first month. Meanwhile docu-series Our Planet got 10 Emmy nominations and was able to reach 33 million households during its first month of release.

In movies, Adam Sandler and Jennifer Aniston's Murder Mystery saw huge success with 73 million households breaking new movie records for Netflix. "We are making good progress with our original films portfolio with more and more of our films creating larger audiences than our pay 1 licensed movies," writes Hastings, with The Perfect Date and Always Be My Maybe as noticeable mentions.

Netflix is expecting a strong Q3 thanks to Stranger Things season 3 along with "new seasons of La Casa de Papel (Money Heist), The Crown, and the final season of the iconic Orange is the New Black as well as big films like The Irishman from Martin Scorsese and action movie 6 Underground."

Netflix also brought on-board Jackie Lee-Joe as its new CMO to further its marketing efforts, citing the launch of season 3 of Stranger Things that included partnerships "with best-in-class brands like Coke, Nike, Burger King, and Baskin Robbins to build deep connections with our fans." It also mentioned the mobile game based on the hit series announced at E3, along with a new title based on its upcoming Dark Crystal: Age of Resistance and a partnership with Epic Games. Netflix is calling these gaming efforts "merchandising initiatives" and not a new business for the company as it looks to develop an enthusiastic fanbase for its titles.

It also took the opportunity to announce its recent partnership with AT&T in the US for Netflix integration in the ISP's new set-top box and a lower-price mobile-screen plan for users in India, in addition to existing plans, as it looks to expand viewers in emerging markets.

Highlighting its competition over the next year, Netflix mentioned Disney, Apple, WarnerMedia, NBCU as new entries who'll be joining Hulu, Amazon, BBC, Hotstar, YouTube and many others in offering streaming entertainment. The eventual removal of Disney's catalog, Friends, The Office and other content will free up budget for originals as licensing fees expire. "We don’t have material viewing concentration as even our largest titles (that are watched by millions of members) account for only a low single digit percentage of streaming hours," said Hastings.

The company also rejected any notions that it'll be introducing ads on the platform. "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."

Since the Q2 reports' release, Netflix stock plummeted due to missing forecast of new memberships but the streaming service is still home to a respectable 151.5 million subscribers globally.

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[Sir Alex Ice]

The problem with Netflix is that it does not have the same content available in all the countries. Viewers in Eastern Europe do not have access to all the titles US or Canada residents might find.

So the viewers try Netflix for free or pay the subscription a couple of months and then they abandon it because it is not worth it for monthly fee.

 

[yRaz]

Lack of original content? We dont want original content, we can't the shows we can watch on TV and original content doesn't replace things like the office

 

[Impudicus]

For me personally, the thing I most dislike about netflix is their interface. It prioritizes promoting their content over providing a quality user experience. My "continue watching" is not listed at the top as it should be, it's also not always in the same place. There's no previous watched list. It feels like a website that keeps shoving more and more ads in your face. There's plenty of content to keep me entertained forever, but I shouldn't be getting annoyed on my way to it.

 

[wiyosaya]

Their subscriber base is down by 0.13%, in other words, 0.0013 of their subscriber base, and this is a major loss of subscribers? OK, sure, whatever the analysts say!

For me personally, the thing I most dislike about netflix is their interface. It prioritizes promoting their content over providing a quality user experience. My "continue watching" is not listed at the top as it should be, it's also not always in the same place. There's no previous watched list. It feels like a website that keeps shoving more and more ads in your face. There's plenty of content to keep me entertained forever, but I shouldn't be getting annoyed on my way to it.

There is a viewing history list. Go into the web interface, and it is under your account - since I am not in front of my account at the moment, I cannot tell you where it is exactly.

Most things cannot be managed by their app - and that viewing history list is nowhere to be found in their app. I agree that there app leaves much to be desired and is full of, well, crap that they suggest, but for me, that is a relatively minor inconvenience.

The one big thing that I like about Netflix, aside from what I watch, is their audio. No other streaming service, AFAIK, has anything even remotely as good as Netflix's DD+ audio. Everyone else pretty much as two channel audio at best and most of it sounds monophonic. That is a big thing I don't like about Hulu and, IIRC, is what Amazon has.

Lack of original content? We dont want original content, we can't the shows we can watch on TV and original content doesn't replace things like the office

As I see it, they have a large number of TV shows - the caveat is that you have to wait until they are in syndication and the length of time for that varies. Personally, I don't mind waiting.

Whether anyone, including myself, likes that content or not depends on their particular likes. For me, I have found a great deal of original content (and content in general) that I like, but my likes are all over the place, though I tend to shy away from most sitcoms. There is a considerable amount of animated material that I like, including anime, as well as drama and sci-fi. One particular original content show that I like that is squarely in the drama category is "Mindhunter." https://www.imdb.com/title/tt5290382/?ref_=fn_al_tt_1

For me, the fact that they are dropping "The Office" and "Friends" is a plus. Netflix spent $100M on "Friends". As I see it, that is money that is now available for use elsewhere.

Part of the problem, as I see it, is that there is so much material on Netflix it is not necessarily easy to find things.

Maybe this has a bright side to it in that since their demand is down, they may be much more reluctant to raise their prices in the future. As more streaming services come on line, perhaps the competition among them, if they survive, will keep prices low.

However, some things that are exclusive content to certain services like Star Trek: Discovery on CBS' All Access comes out on disc. My local library has a copy of at least the first season and in the not too distant future, I'll be borrowing it from them. My library has become a preferred means for me to see material that is "exclusive" to various outlets without subscribing to them. I have no intent to subscribe to a myriad of services and will gladly wait for what ever it is to come out on disk especially since the local library has access to most of it.

 

[Dimitrios]

Good they keep raising prices and charged me $20 or $18 a month on one of my credit cards and there aren't any plans at that price but I was getting charged correctly on my other card which was the usual $8 or 10 bucks.

 

[cuerdc]

I cancelled continuous price hikes and at point where watched most content interested in.
All there newly added stuff is just junk spend longer browsing content trying to find something that could possibly be watchable.
Whole industry is a rip off surely one provider can catalog and supply every tv show/movie regardless
of region for a reasonable monthly fee.
But that would just be too easy....

 

[slamscaper]

I'll tell you what scares me about Netflix. It's not the fact that it's losing the old shows like "Friends' and "The Office." Those shows have been over for a long time and all the super fans have seen every episode multiple times.

There are two big problems I see right now. One is that Netflix decided to stop putting a lot of money into their original content. Why??? Their original content (like Stranger Things for instance) kicks *** and it's the content they can always guarantee will be there. I don't get why they cut funding to their original programming when it was so damn good!

Here's the second, HUGE issue... They are modifying their own art because of people complaining about cigarettes and explicit scenes. Like the whole thing about Netflix coming out and stating they are going to remove smoking from more of their content because "kids are smoking." This is RIDICULOUS. They need to stand up for their own art. Another thing that pisses me off is regarding their very serious drama "13 reasons why." They actually fully removed a scene that depicted a girl cutting herself in the bathtub. Now I understand that some series and movies do affect minors in ways, but in the end, these shows all came with EXPLICIT warnings on them and if your children watched them it's YOUR FAULT as a parent and not the fault of Netflix. Netflix should have stood up for their art again, but instead they removed the whole scene???? Imagine if Coppola had went back and removed scenes from the Godfather or the sequels. Netflix is going to fade away unless they quite simply grow some effin balls and stand by their own art.