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Netflix Stock Tumbles as Subscriber Growth Falls Far Below Expectations Netflix Loses Subscribes in U.S. as Growth Slows
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Netflix, the streaming juggernaut that has upended the entertainment industry, showed signs of vulnerability Wednesday when it significantly undershot the number of customers it had expected to sign up for the second quarter.Netflix, the streaming juggernaut that has upended the entertainment industry, showed signs of vulnerability Wednesday when it significantly undershot the number of customers it had expected to sign up for the second quarter.
The company said it had added 2.7 million subscribers worldwide for the three months ending in June, well short of the five million that investors were expecting.The company said it had added 2.7 million subscribers worldwide for the three months ending in June, well short of the five million that investors were expecting.
It also said it had lost 126,000 paid subscribers in the United States during the period, the first time it has shed domestic customers since it started putting out original programming seven years ago. Netflix also said it had lost 126,000 paid subscribers in the United States during the period, the first time it has shed domestic customers since it started putting out original programming seven years ago.
Netflix’s stock fell more than 10 percent after the market closed, a drop of more than $17 billion in market value.Netflix’s stock fell more than 10 percent after the market closed, a drop of more than $17 billion in market value.
The second quarter is typically the company’s weakest period, but its performance this time was unusually poor. At the start of the quarter, Netflix announced that it was raising prices by anywhere from 13 to 18 percent, depending on the subscription plan. In its statement on its second-quarter earnings, the company acknowledged that the higher rates had something to do with its failure to meet expectations. The second quarter is typically the company’s weakest time of year but its performance this time was unusually poor. Netflix announced in January that it was raising prices by anywhere from 13 to 18 percent, depending on the subscription plan, with increases hitting existing subscribers in late March. In its statement on its second-quarter earnings, the company acknowledged that the higher rates had something to do with its failure to meet expectations.
Netflix decided to charge more at least partly because it burns a lot of cash, much of it borrowed, and spends wildly on Hollywood talent. Last year, the company signed Ryan Murphy, the prolific producer behind “Glee” and the anthology series “American Crime Story” and “American Horror Story,” to a five-year deal said to be worth nearly $300 million.Netflix decided to charge more at least partly because it burns a lot of cash, much of it borrowed, and spends wildly on Hollywood talent. Last year, the company signed Ryan Murphy, the prolific producer behind “Glee” and the anthology series “American Crime Story” and “American Horror Story,” to a five-year deal said to be worth nearly $300 million.
After wooing him away from 21st Century Fox, Netflix signed another name producer, Shonda Rhimes, the creator of ABC’s “Grey’s Anatomy,” away from the Walt Disney Company, giving her a nine-figure deal.After wooing him away from 21st Century Fox, Netflix signed another name producer, Shonda Rhimes, the creator of ABC’s “Grey’s Anatomy,” away from the Walt Disney Company, giving her a nine-figure deal.
In its report on Wednesday, Netflix revised its forecast for the current quarter, when the new season of one of its biggest hits, “Stranger Things,” has been made available. It said it now expected to add more than seven million customers during the summer months, slightly up from its previous estimate. Netflix released its second-quarter report a little more than a week after the news that it would lose the North American rights to “Friends,” the NBC sitcom that has had a highly remunerative afterlife in syndication and online.
“Friends” was the second-most-watched show on Netflix in 2018, according to Nielsen, which is probably why the company was willing to pay as much as $100 million to stream the show worldwide in 2019. But starting next year, American and Canadian customers will be able to find it only on HBO Max.
Starting next year, Netflix’s North American subscribers will also have to go elsewhere for “The Office,” another NBC show that has shown durability as a rerun and was especially popular among the streaming service’s subscribers.
Netflix noted in its report 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.
It also revised its forecast for the current quarter, when the new season of “Stranger Things” was made available. The company said it now expected to add more than seven million customers during the summer months, slightly up from its previous estimate.