Netflix jockeys for subscriber growth

Aditya Saxena

Hang on for a minute...we're trying to find some more stories you might like.


Email This Story






As fall recedes, the streaming wars portend uncertainty for Netflix, which missed its subscriber growth target for the second consecutive quarter. The company reported a fall of 22% in common stock over the past three months, stoking fears in investors about its ability to perform against traditional media companies who are planning to come up with their own streaming service.

Not all is unwell, however, as the company also reported a surge in international subscribers and the results sparked an overall 9% jump in shares, in after-hours trading, and it is also worth mentioning that in the previous quarter, Netflix had experienced a drop in U.S. subscribers for the first time in a decade – something that was averted for this quarter. Nonetheless, the company, as a consequence, projected moderate growth for the final quarter of 2019: 7.6 million net additions to its paid-subscriber base, well short of the 9.7 million that analysts were expecting.  

The company further reported that it added a total of 517,000 domestic subscribers in the third quarter (in comparison with the second quarter), falling short of the 800,000 it was expecting and added 6.8 million subscribers globally, falling short of the 7 million it had predicted. The Wall Street Journal reported that it said its “subscriber retention continues to suffer” from its decision to raise prices earlier, which only slightly boosted average revenue per subscriber (by 16%), prompting Netflix to say that this will “strengthen its value proposition” in its letter to shareholders. 

While its efforts hitherto have not entirely been in vain, what’s surprising most of all is that amongst everything that has transpired, Netflix appears placid, nonchalant, unchanged, and rather fixated on adhering to their pricing model. While the U.S. is not a price-sensitive market, it is only a gamble to not respond to changing market signals.

And it is not that such a strategy has not worked in favor of Netflix in the past years. The difference, this time, is that two of the biggest companies — Disney and Apple — are foraying into the streaming-video market with prices that even when combined, cost less than Netflix’s most popular plan, and also, the company is continuing to lose critical content it had licensed from big entertainment giants.

Disney will be the bigger threat since it will include Marvel and Pixar’s library as well as its own originals and the service is going to focus on high-end brands like “Toy Story”, “The Simpsons” and “Star Wars”, and will also be available on Roku and Playstation as well as “a full array of platforms in place” post its launch. 

Furthermore, earlier this year, I reported in another article, that Disney went on an acquisition spree to takeover high-flying giants like Fox and Sky (a U.K based television network) and has begun to pull back its content from existing over the top licensers. Notwithstanding that its current catalog selection already entails a surfeit of prolific blue-chip celluloid material from almost all known genres and that too all of it, so creatively curated that it fits its demographics (segmented by country or otherwise) perfectly.

With the cost of only $6.99 a month (half of what Netflix charges for its most popular plan ($12.99), Netflix’s growth prospects look remarkably bleak. While Apple’s Apple TV+ is not an immediately looming threat because of limited content, it will also set the stage for a showdown in the future if Netflix continues to jockey for subscribers following Disney+’s launch. Notwithstanding that next year, Comcast Corp. ’s NBCUniversal (famous for The Office), AT&T’s WarnerMedia, and HBO Max, are all planning to debut their streaming services.   

Netflix CEO Reed Hastings, CPO Greg Peters, and chief content officer Ted Sarandos, feigned coolness on the earnings call with Hastings specifically saying that, “fundamentally there’s not a big change here”, and that “Disney is going to be a great competitor”, and finally adding that all streaming services are “relatively small compared to linear TV”. However, only time will tell whether linear TV has a market when put together against big entertainment giants like Disney and Apple.