A weak slate of Netflix content releases, not competition from other services, was likely to blame for a shortfall in subscriber growth, according to company executives. As a result, shares are down about 10 percent in pre-market trading on Thursday.
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Netflix posted a rare decline in its U.S. subscriber base in the second quarter, with a net loss of 126,000 paid users. The company added 2.83 million users in international territories, far below Wall Street’s expectations. In after-hours trading, Netflix shares fell more than 11 percent on the second-quarter report.
While new streaming services such as Disney Plus and HBO Max are set to challenge Netflix’s dominance of the sector in the coming months, company executives said they did not believe competition was a major factor in the subscriber shortfall. Instead, Netflix said that a lack of major content releases in the period, coupled with hiked subscription prices, contributed to the miss.
“We don’t believe competition was 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 (while our over-forecast was in every region),” Netflix executives said in a shareholder letter. “Rather, we think Q2’s content slate drove less growth in paid net [additions] than we anticipated.”
Netflix said it expects to “return to more typical growth” in subscribers in the third quarter, which features the release of “Stranger Things” season 3, the final season of “Orange is the New Black” and the Martin Scorcese-directed crime drama “The Irishman.”
With Disney Plus set to launch in late 2019 and services from HBO, NBC and WarnerMedia pegged for 2020, Netflix will soon face direct competition from other media giants. Netflix is set to lose two of its most popular shows in “Friends” and “The Office” on licensing deals to rival platforms in the coming months.
“Much of our domestic, and eventually global, Disney catalog, 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,” Netflix said.
Netflix added that it plans to remain “advertising free,” dismissing speculation to the contrary as false.