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Netflix Stocks Falling

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Four consecutive years of subscriber growth, and finally Netflix is experiencing its downfall. Recent reports claim that it is falling short of expected subscriber additions in the second quarter of this year. Netflix got less than 1 million subscribers from what they had been expecting. Not just that, but subscriber growth is projected to decline further.

Even when this is not the first time that Netflix didn’t surpass its expectation, this one is surely different. If its predictions for the coming quarter prove to be true, things might get hard there. That would mean two consecutive quarters of declining user growth. Subscriber addition has been minimized so greatly that it resembles the only time Netflix experienced this back in the first quarter of 2017.

Netflix is not very accurate with its estimates. But this latest shortfall of 1 million subscribers came right after exceeding estimate subscriber growth for 2 consecutive quarters. This has sure left investors to wonder if the correction was just short-term to prepare them for this doom. The CEO, Reed Hastings announced that maybe the company had over-estimated its growth. In a conference call he shared that,

We’ve seen this movie of Q2 shortfall before, about two years ago in 2016, and we never did find the explanation to that, other than there is some bumpiness in the business, and continued to perform after that.

Lately, Netflix has been focusing a lot on international subscribers. In fact, the bulk of subscriber growth has been contributed by countries outside the US for the past few quarters. Only last year, international sales well surpassed the domestic sales for Netflix. As per the latest reports for this quarter on Monday, 4.5 million subscribers from a total of 5.2 million came from overseas.

Considering the circumstances, Netflix is still looking for opportunities to expand. Especially in markets where it’s having the early days. In countries like India, broadcast television is still popular and the market for Netflix is yet to develop. To gain a bigger market share, Netflix has added tv shows and movies specifically for an Indian audience. Reed Hasting, CEO at Netflix talks about the Indian market saying that,

We have a long way to go.

Not only has subscriber growth decreased, but a lot of people have even unsubscribed. The company however did not reveal the number of people who have left the service. With other giant corporations entering the same business, Netflix had to see this some day.

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