Netflix Misses Subscriber Mark for Second Straight Quarter

BOGOTA, COLOMBIA - OCTOBER 09: Netflix CEO Reed Hastings speaks during Netflix Slate Event 2018 at JW Marriot on October 9, 2018 in Bogota, Colombia. (Photo by Daniel Muñoz/Getty Images for NETFLIX)
Daniel Muñoz/Getty Images for NETFLIX

Netflix saw disappointing domestic subscriber growth for the third quarter, signaling rougher waters ahead as the streaming giant braces itself for competition from the Walt Disney Company and Apple. This is the second straight quarter in which Netflix has missed its subscriber growth projections.

The streaming giant said Wednesday that it signed up 517,000 new subscribers for the quarter ending in September, significantly off from the more than 800,000 that analysts had been expecting.

Wall Street investors look to Netflix’s subscriber base as the key metric for the company’s future profitability. As Netflix continues to borrow billions of dollars to finance its growing slate of original programming, it will depend on a growing customer base to eventually pay off that debt.

But the Netflix juggernaut is facing stronger headwinds. The streamer shocked Wall Street last quarter when it lost domestic subscribers for the first time in eight years, shedding a whopping 126,000 customers in the U.S.

Some subscribers were turned off by higher prices. Netflix announced its highest price hike ever in January, raising the price of its most popular subscription package to $12.99 from $10.99.

“Since our U.S. price increase earlier this year, retention has not yet fully returned on a sustained basis to pre-price-change levels, which has led to slower U.S. membership growth,” the company said in an investor note on Wednesday.

Consumers will soon have cheaper streaming options at their fingertips. Disney+, which is set to launch next month, will only cost $6.99 a month and will feature movies and TV shows from the combined power of Disney and the recently acquired Fox.

Apple TV+ will cost even less at $4.99 a month, and is also set to launch next month, creating more competition for Netflix, which for years has easily dominated the streaming universe.

Netflix has also alienated many conservative and right-of-center consumers with its close ties to former President Barack Obama, who signed a production deal with the streamer last year. Susan Rice, Obama’s national security advisor, recently joined Netflix’s board of directors.

A survey last year by the research firm YouGov found that Netflix’s positive impression rating with Republicans plummeted 16 percent since the beginning of 2018. Meanwhile, the company’s positive impression rating among Democrats rose by 15 percent in the same period.

Despite disappointing subscriber results, Netflix shares rose in after-hours trading Wednesday after the company reported quarterly earnings that exceeded guidance.

Netflix said that upcoming releases including Martin Scorsese’s acclaimed mob epic The Irishman and Noah Baumbach’s intimate drama Marriage Story will help to strengthen its fourth-quarter results.

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