In its third-quarter earnings report, Netflix disappointed Wall Street by posting a much lower number of new U.S. subscribers than anticipated. The service added just 880,000 U.S. subscribers in the third quarter — 23 percent lower than its 1.15 million forecast. International growth of 2.74 million made up the difference, but the sub-par subscription numbers nevertheless struck a chord with investors. Shares of Netflix dropped 2.3 percent on the day, according to Variety, and even sparked articles pondering whether investors should trade stocks in the streamer.
Coming off a booming run that saw its stock increase a whopping 120 percent on the year, Netflix has hit a few snags as of late, disappointing viewers by letting a licensing deal with Epix (home of thousands of Paramount, MGM and Lionsgate films) expire, along with hiking its standard subscription rate by a dollar in recent weeks. Chief content officer Ted Sarandos explained at the time that the streamer ended its pact with Epix to focus more on original content. Netflix CEO Reed Hastings and CFO reiterated in the quarterly letter to shareholders that the streamer still boasts a prolific catalogue. “So far, we’ve seen no material reduction in U.S. feature film viewing as we have so many other films for members to enjoy.”
We haven’t yet seen the fallout from Netflix raising the price of its most popular subscription plan last week, and it may never come. The streamer explained that move was to pave the way for more original content. And, with hit shows like Orange is the New Black, House of Cards and the critically-acclaimed Narcos, it certainly continues to threaten cablers with top notch shows.
Competition, from Hulu (which has grown to 9 million subscribers) and Amazon Prime Instant Video (“tens of millions” of subscribers), is also increasing. That being said, slowed domestic subscription growth and increased competition certainly don’t mean panic for the streamer. Moreso, it should be a reminder to Netflix that it still needs to focus on the US while it continues its international expansion.
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