Netflix stocks have plummeted 13% after the service announced that its second-quarter subscription growth came up almost half what it had projected. Netflix had anticipated adding 5 million new subscribers between April and June, based on 5.5 million adds last year during that period. In actuality, Netflix only saw 2.7 million new sign-ups. In a letter to shareholders, Netflix divulged that while subscriptions were down everywhere, they were particularly lower in regions where it had recently raised prices. However, Netflix doesn’t believe the price hike is THE reason for lower subscriptions, nor does it believe it was due to competition. Rather, Netflix blames the lack of compelling original content.
Along those lines, Netflix stated that it will report 7 million new subscribers for its third quarter, thanks largely to ‘Stranger Things 3’.
In fact, (and I’m translating here, as the shareholder’s letter Netflix distributed is in technical financial-speak) Netflix saw 9 million new sign-ups in the first quarter which was vastly higher than their projections, so it believes at the end of the year, once everything is averaged out, subscriptions will be healthy across the board.
Netflix already spends billions on original programming, but it seems that it’s not panning out. While Amazon and Hulu offer far less original content, some of their projects– Amazon’s ‘The Marvelous Mrs. Maisel’ and Hulu’s ‘The Handmaid’s Tale’— are not only breakout hits with viewers, but prestige projects, having won Emmys, something none of Netflix’s shows has accomplished.
‘Stranger Things’ certainly Netflix’s only cash cow, as ‘Black Mirror’ is a worldwide hit, as was ‘The Haunting of Hill House’. They also have the highly-anticipated ‘The Witcher’ on its way, and has placed a heavy emphasis on its anime library snapping up existing properties and crafting new series, like the hit ‘Castlevania’.
But all eyes are on the upcoming Disney+ and HBO Max, which are more likely to draw away current Netflix subscribers than the existing services, because they will offer a lot more content, including original fare, including Disney+’s ‘Star Wars’ based shows ‘The Mandalorian’ and Cassian Andor series, and several upcoming Marvel Studios series featuring the characters and actors from the biggest movie franchise in the world.
And just my personal observation, maybe original content isn’t the only area that needs to be prioritized. Netflix is about to lose its highest-streaming show, which isn’t an original, but the defunct NBC sitcom ‘The Office’. And while I don’t know where ‘Friends’ falls on its chart, last year Netflix paid $100 million to keep it for one year, so it’s clearly pretty high up there. ‘Friends’ is headed over to HBO Max. ‘The Office’ is going to the as-yet-unnamed NBC Universal streaming service and it’s believed to be taking ‘Parks and Recreation’ with it.
This is basically “comfort food TV.” Most people have already seen every episode, but they still like to put it on because it’s entertaining but doesn’t require a viewer to binge for hours on end or to even pay attention. They can stream while eating, reading, playing on their mobile devices, etc.
The majority of Netflix shows have to be streamed in order, actively watched, and nearly every episode ends on a cliffhanger, so viewers wind up watching for several hours before they even realize it. It’s a commitment.
Back to Netflix’s subscriber rate, it is likely that it will end 2019 with the growth rate it predicted because as stated, the new subscriber rate will average out. But Disney+ and HBO Max are likely to be game-changers. With rates for all of these services as high as they are, people are about to get a lot more discerning. Netflix has decided to focus on original content, so that content better start scoring with viewers more than their recent offerings have.
What do you think? Will Netflix remain #1 in the streaming race?