It's not quite time to hit the panic button just yet, but Netflix just lost subscribers in the U.S. for the first time in nearly a decade. This reveal came as part of a recent quarterly earnings report and, undoubtedly, it's not what any company wants to be saying to its investors, yet they're still far and away the king in the streaming game. At least for now. But the real question is, can they keep it up and will their subscriber growth continue to stall in the months and years ahead?
According to a letter sent out to shareholders, Netflix lost 126,000 paid subscribers in the U.S. during quarter 2 this year. They had projected growth of 352,000 subscribers heading into the quarter, following better than expected growth in quarter 1. To make matters worse, they also missed their international projected growth by 2.3 million. Here's how the company explained it to shareholders.
"Our missed forecast was across all regions, but slightly more so in regions with price increases. We 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). Rather, we think Q2's content slate drove less growth in paid net adds than we anticipated. Additionally, Q1 was so large for us (9.6m net adds), there may have been more pull-forward effect than we realized. In prior quarters with over-forecasts, we've found that the underlying long-term growth was not affected and staying focused on the fundamentals of our business served us well."
Essentially, Netflix is blaming the poor numbers on the price increase, which went into effect in the U.S. in May, and their slate of original content in quarter 2. Whatever the reason may be, Wall Street has responded in a way that has only served to make matters worse, as the company's stock dropped by 11 percent following the news. That's not too surprising, considering this is the first time Netflix has lost subscribers in the U.S. since 2011, when they tried to divorce their streaming service from their once-popular DVD mailing service.
Things are only going to get more challenging in the future. Netflix is going to lose some of their most popular, licensed shows, including The Office and Friends, as they will be moving to rival streaming services that are set to launch, such as HBO Max. There's also Disney+ coming later this year, as well as Apple+, both of which are investing heavily in original content and looking to carve out their chunk of the streaming market.
Netflix still has nearly 150 million subscribers worldwide, and nobody else is even close. For now. However, competition is getting more fierce and in order to stay on top, Netflix will have to keep spending like crazy on potentially risky content that can not only attract new subscribers but, more importantly, keep current subscribers on board. This news was previously reported by Variety.