Netflix missed its subscriber growth targets by about a million subscribers in the three months ending in June, sparking concern among investors that there might be a saturation limit for the streaming platform. The company’s stock price fell 14 percent on the news, the BBC reports, although that came after an impressive run that saw the stock gaining much more value than that over the past year.
Netflix has 130 million subscribers globally. It had projected the addition of 6.2 million subscribers in the quarter, but it managed to get 5.2 million instead.
Some investors have seen Netflix as the future of television—a sure-to-be dominant hub for all our entertainment viewing. But the landscape is increasingly looking more like an unbundled version of the old cable model—dozens of channels from Netflix to CBS to Showtime, each with their own monthly fee. The economics of putting it all in one $ 8-15/month subscription service were never sustainable.
Netflix is expected to face increasing competition in the next year or two. Newly appointed HBO Chief Executive John Stankey recently told employees that the company needs to move away from its boutique, prestige-programming focus and closer to Netflix’s high-content-volume strategy. The world’s biggest tech company, Apple, also plans to launch a streaming service that would compete with Netflix. So, too, does one of the world’s biggest entertainment media companies, Disney, which currently dominates the landscape in Hollywood with high-value properties like Marvel and Star Wars.
Netflix has generally been an investor darling in the past; there are many who have believed it will be to television what Amazon is for retail. Netflix accounts for 8 percent of TV viewing overall—an impressive number but not the dominance some expected.
Netflix CEO Reed Hastings has signaled to investors that they can expect good news with regard to engagement—frequency and length of viewing sessions. Research from CBH Insights cited by CNBC suggests that Netflix subscribers watch an average of 10 hours per week, compared to just five hours on Amazon and Hulu, whereas the National Bureau of Labor Statistics says traditional TV viewers watch nearly 20 hours per week. Cable is still on top.
Netflix will spend as much as $ 8 billion producing and acquiring TV shows and movies this year, including Disenchantment from The Simpsons and Futurama creator Matt Groening, new seasons of House of Cards and Making a Murderer, and presumably several series and films yet to be announced.
