Shares for streaming giant Netflix are already taking a hit ahead of the expected down turn in ad revenue that will inevitably result from the ongoing strike by Hollywood actors and writers, who are seeking remedies for pay disparities from streaming services.
Netflix already spooked investors with its latest lower-than-expected earnings even before the full effect of the strike might become evident. The company just reported second-quarter earnings of $8.19 billion, well below the $8.3 billion expected by Wall Street analysts, The Messenger reported.
The higher estimates were based on the new advertisement scheme the streamer recently enacted on top of the 6 million in new subscribers that were added by the end of June. Still, Netflix warned that the full effect of its new revenue-boosting ad system won’t be realized until the second half of this year.
Still, the company says it is already seeing good signs from the new plans.
The “results show that lower content spend and higher ad revenue is the name of the game for streaming companies to turn a profit,” said Scott Purdy, U.S. national media leader at KPMG. “In the short-term at least, the Hollywood strikes are indirectly helping companies crack the code of profitability. Long-term though, the strikes could create a scenario of massive churn and lower ad revenue for streaming companies.”
Still, despite the optimistic claims, the company has only projected $8.5 billion in revenue for the third quarter.
Netflix has also not fully explained its new paid-sharing program and also did not provide any data on it ad-supported tier plans, according to Variety.
The lack of info has led analysts to say that they can’t accurately predict the direction of the streamer with too much accuracy, Variety added.
Netflix shares were down more than eight percent in early trading on Thursday. Analysts added that the Nasdaq fell more than one percent mostly because of the sudden decline of the streamer’s stock, according to CNBC.
Despite all this, other streaming platforms seem to be in a worse position. Recently, HBO admitted that it is looking to partner with Netflix because its Max streaming service is struggling as a stand alone service.
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