Netflix the streaming subscription service has reported its earnings on Wednesday night and the results were quite shocking. It had reported that Netflix loses 126,000 and 2.7 million globally paid subscribers in the United States during the second quarter. It is the first time the company had shed domestic streaming customers since it started its digital service 12 years ago and its shares fell sharply.
Stocked dropped by more than 10 percent just after the report came out, it is a disastrous slowdown for a service that is based on subscribers growth, it raises new questions about how long the company can justify its content spending spree. Netflix emphasized the international markets where subscribers growth is still heavy, nearly all the company’s new subscribers were from international markets this quarter. According to CEO Reed Hastings, there is still plenty of room to grow.
Netflix executives also spent a significant portion of their call talking about India, where the company expects significant growth. It’s a largely unsaturated market and one that Netflix has tried to develop content for over some time. Netflix is about to launch five new originals for India, some of which may be marketed to audiences in the US and Europe, too.
Netflix also noted that its second-quarter slate of programming lacking fresh episodes of two of its original hits, “The Crown” and “Stranger Things,” was not as robust as it had been the previous quarter, which most likely figured in the disappointing results. Apart from these shows, the other three shows How to Sell Drugs Online (Germany), The Rain (Denmark), and Quicksand (Sweden) have all found big audiences outside of their native region. Each show has successfully gathered between 12 and 15 million global viewers.
Meanwhile, Netflix is facing a troublesome time in the US as the company has lost subscribers this quarter for the first time in years, a combination of the price hike and a content lull. Though the US market has already been oversaturated with the streaming services. Like WarnerMedia, Disney, and Apple all launching streaming services, the only way to ensure growth is going outside the United States.
Currently, Netflix has 60 million paying domestic subscribers, and Hastings believes they can increase to 90 million, but the risk of market saturation is real, and it raises difficult questions for the company’s content strategy. The company is also facing a number of other problems as well which could affect the overall growth in the coming time. Netflix loses a number of heavily watched licensed series, like Friends andThe Office, to competitors WarnerMedia and NBC Universal respectively.
Executives know that they have to replace people’s favorite TV shows, which they don’t own and are departing for competitor services, with new shows and films. The sudden loss of licensed content is going to be felt all over the US as well as in other countries because of the agreements with the rights holders.