Netflix has long been at the forefront of the age of internet streaming. The company has undeniably revolutionised the way television is viewed and lead the crusade against traditional cable TV. However, could the Netflix boom be slowing down? New data suggests that Netflix isn’t growing its subscriber base at the rate it once was, with loyal customers leaving the streaming service for better priced alternatives with a wider content choice.
According to Slate, Wall Street is becoming increasingly worried that brainchild of the streaming era, Netflix, has reached its saturation point. The company released its second-quarter earnings on Monday, which largely consisted of good news for the California-based company. However, it was the news that the streaming service’s once unstoppable subscriber growth is slowing down that caused a fifteen percent drop in after-hours trade.
Whilst Netflix is still turning over a profit of $40.8 million, there’s a good deal of concern over the company’s capacity to grow. That’s because the streaming service was only able to add 1.7 million new subscribers in the last three months, compared to the 2.5 million that the company itself had predicted. That’s well over 700,000 potential subscribers that Netflix has lost since it released initial predictions for the second quarter and clearly, a figure that Netflix’s investors on Wall Street are incredibly worried about.
According to BuzzFeed, Netflix has always had something of a bumpy ride in terms of profit. However, the firm’s ability to grow has always kept investors content, with each quarter reporting considerable rises in subscriber growth. However, something was different this time. Netflix was unable to compensate for its minute profits with incredible subscriber growth, leading investors to panic over the firm’s long-term future.
Netflix says the regulatory climate in China has become "more challenging" but it's still exploring an entry https://t.co/NR27nvtjdR— Shalini Ramachandran (@shalini) July 18, 2016
Netflix is, in theory, gaining new subscribers, and that’s largely helped by their expansion into a range of new markets, including most recently China. However, Netflix’s underwhelming subscriber growth falls down to their inability to retain users, hindered in part by recent price hikes. Netflix admitted that their recent decision to once again bump subscription prices from $7.99 up to $9.99 is turning off longtime subscribers, with many users choosing to cancel their subscription even before the price hike comes into effect.
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Despite the news, Netflix is still the most powerful player in the streaming sector. However, it was always a given with a service like Netflix that a time will come when everyone who wants to subscribe to Netflix, already does. With that in mind, Netflix will have to learn to rely less on growing its subscriber base and instead making the streaming service more profitable on a day to day basis.
Netflix’s key problem in making profit falls down to the amount it spends on output. The streaming service now invests more money than ever in its original programming, with shows like House of Cards having some of the biggest budgets on television. With that in mind, Netflix may look to scale down its original programming and instead turn over a profit by distributing a catalogue of pre-released content. However, given some of the biggest shows on the streaming service fall under the Netflix Original tag, that looks increasingly unlikely.
In the coming years, Netflix will have to fight off competition from the likes of Amazon and Hulu if it wants to remain the top dog in the streaming world. However, Netflix will also have to make some pretty serious changes within its own ranks too if it wants to survive as subscriber growth dwindles.
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