Netflix shares slide on disappointing Q2 subscriber growth

Netflix said revenue for the quarter grew 26% from a year ago to US$4.9 billion and profit fell 29% at US$271 million. (AFP pic)

SAN FRANCISCO: Netflix shares plunged in after-hours trade Wednesday after its quarterly update showed weaker-than-expected subscriber growth for the streaming television sector leader.

Netflix said it added 2.7 million new subscribers worldwide in the April-June period, well below expectations, as the sector prepared for offerings from rival groups including Walt Disney, Apple and others.

Shares in Netflix skidded 11.9% to US$319.29 in after-market trade following the results which showed revenues and profits largely in line with analyst forecasts.

Netflix said in a letter to investors that it still sees long-term growth on target, dismissing concerns that consumers were gravitating to rivals.

“We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during the second quarter, and competitive intensity and our penetration is varied across regions,” the letter said.

Netflix, known for its original shows such as “The Crown” and “Orange is the New Black,” said the latest shows did not attract as many new subscribers.

“We think the second quarter’s content slate drove less growth in paid net adds than we anticipated,” the company said.

Netflix said revenue for the quarter grew 26% from a year ago to US$4.9 billion and profit fell 29% at US$271 million.

A slight decline in the number of US subscribers indicated some people dropped the service due to a rise in price, according to eMarketer forecasting analyst Eric Haggstrom.

“Netflix has a difficult road ahead with looming competition and the removal of popular content, but a strong content schedule in Q3 should draw many former subscribers back in,” Haggstrom said.

Farewell to ‘Friends’

Netflix will be losing some of its hit shows such as “Friends” to rival platforms being launched in the coming months, but argued that it will make up for that with original content.

“Much of our domestic, and eventually global, Disney catalogue, as well as ‘Friends,’ ‘The Office,’ and some other licensed content will wind down over the coming years, freeing up budget for more original content,” the company said.

“From what we’ve seen in the past when we drop strong catalog content… our members shift over to enjoying our other great content.”

WarnerMedia will launch its new Netflix rival “HBO Max” in early 2020 after reclaiming the rights to stream its hugely popular television comedy “Friends,” the company said Tuesday.

The new service will enter an increasingly crowded TV streaming marketplace, vying for customers with Netflix, Hulu and Amazon as well as the soon-to-be-launched Disney+, and Apple’s upcoming product.

Staying ad-free

Netflix said in an earnings letter to shareholders that it has no plans to add advertising to its streaming television service.

“We, like HBO, are advertising free,” the Silicon Valley-based company said.

“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.”

The company planned to continue to invest in original content to keep and win subscribers.

Netflix last month made its first formal appearance at the annual Electronic Entertainment Expo, showcasing plans for video games based on hit original shows such as “Stranger Things.”

A “Stranger Things 3” video game tailored for PlayStation, Switch, and Xbox consoles, as well as personal computers, was released on July 4 as a download priced at US$19.99.

Netflix this year will also release an eponymous strategy game, where players take turns, spinning off an original “The Dark Crystal: Age of Resistance” television series based on a dark puppet animated film from 1982 directed by Jim Henson and Frank Oz.

A new “Stranger Things” role-playing puzzle game for mobile devices will be released next year.

“Like our other merchandising initiatives, these games are designed to build fandom for our titles and don’t signal a push into gaming as a new business for Netflix,” the company told shareholders.

Netflix also revealed plans to roll out a low-priced mobile-screen plan in India to lure people to its service there.