Netflix’s subscriber growth tapers off in 2Q, stock tanks
SAN FRANCISCO — Netflix’s video streaming service suffered a dramatic slowdown in growth during its traditionally sluggish spring season, a drop-off coming as the company boosts its prices and girds for even stiffer competition.
The service picked up 2.7 million worldwide subscribers for the April-June period. That’s far below Netflix’s forecast of 5 million subscribers. The second-quarter letdown announced Wednesday comes after Netflix attracted nearly 10 million subscribers during the first three months of the year , more than any other quarter since the debut of its video streaming service 12 years ago.
The slowdown rattled investors already wondering how Netflix might fare against a new wave of competition coming this fall when both Walt Disney Co. and Apple plan to launch their own video streaming services.
After the second-quarter numbers came out, Netflix’s stock plunged 12% in extending trading. If that decrease is replicated in Thursday’s regular trading session, it will be the largest decline in Netflix’s stock price in three years and wipe out $18 billion in shareholder wealth.
Netflix ended June with 151.6 million worldwide subscribers, far more than a current crop of video streaming rivals that includes as Amazon and Hulu.
Signaling it expects to regain some momentum this summer, the company projected it will add 7 million subscribers from July through September. The optimism stems in part from the immense popularity of “Stranger Things,” whose third season attracted record viewership after its July 4 release.
But the battle for viewers’ attention and dollars is about to get much tougher. Besides the Disney and Apple, AT&T will also join the fray next year with HBO Max and NBC is expanding into video streaming, too.
“The competition for winning consumers’ relaxation time is fierce for all companies and great for consumers,” Netflix said in a letter to shareholders.
Netflix traced the second-quarter’s slow subscriber growth primarily to a recent round of prices increase, including hikes of 13% to 18% in its biggest market, in the U.S. That pushed the price of its most popular U.S. plan to $13 per month, testing the bounds of how much some consumers are willing to pay for a service that started out at $8 per month for the same level of service. Disney is already planning to undercut Netflix by charging just $7 per month for its new service .
Some U.S. households decided Netflix is no longer worth it at the higher price, causing the company to end June with 120,000 fewer subscribers in the country than it had at the end of March.
The increasingly crowded video streaming field has led to questions whether Netflix will be able to maintain the rapid rate of subscriber growth that has made its stock as one of Wall Street’s premier performers during the past decade.
A $10,000 investment in Netflix at the end of 2009 would have been worth $460,000 at the end of Wednesday’s regular trading session.