Is Netflix’s growth slowing down? During the second quarter, the video streaming service came up short of adding 6.2 million subscribers. Instead, Netflix missed its projections by a million subscribers, sending its stock price tumbling.
“We had a strong but not stellar Q2,” the company said in a letter to shareholders on Monday.
In total, Netflix now has 130 million subscribers, which is certainly a lot. But during the second quarter, the company added only a mere 670,000 new users in the US, down from a projected 1.2 million.
In a conference call, Netflix executives played down the missed projections, and said it wasn’t due to any recent price increases to the streaming service. The company’s chief financial officer David Wells explained that Netflix may have simply “over-forecasted” the numbers, after four straight quarters of “under-forecasting” them, and beating the estimates.
“Our total addressable market is intact and hasn’t really changed,” Wells added. “We’re still on track for a strong growth year.”
However, Paul Verna, an analyst at eMarketer, said competition in the streaming space may be to blame.
“This is isn’t entirely surprising given rising competition in the video streaming market, where Amazon, Hulu, HBO and others are gaining share of subscription video dollars at Netflix’s expense,” he said in a statement.
To grow the business, Netflix has been expanding outside the US, where a majority of the company’s paid subscriptions now come from. As a result, the streaming service said it’s going to invest in more non-English original content, especially for big markets including India.
In total, Netflix has budgeted about $8 billion this year to spend on developing content. The goal is to eventually produce more feature films and TV shows so that the company can phase out its licensing deals with big studios such as Disney and WarnerMedia, which are developing they’re own streaming services.
Despite the weak quarter, Netflix is set to remain a clear leader in the video streaming industry, according to eMarketer. In the US, Netflix has about 147 million viewers, far more than Amazon, Hulu or HBO’s streaming service, the research company said.
“Netflix has a strong slate of original content that should keep it in the forefront among streaming services, and it plans to continue outspending the competition to develop TV programming and feature films,” Verna added.
Also on the positive side: Netflix reported it’s net income for the quarter reaching $384 million, which is up from a mere $66 million a year ago.
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