Netflix Needs 'To Do Something Bold and Different'

July 17, 2018

Shares of Netflix posted their biggest loss in two years Tuesday after the company failed to meet expectations for both user growth and revenue in the second quarter.

Paul Verna, principal analyst of video at research firm eMarketer, said it could be a sign the company needs to do something different.

"They're a company that does one thing and one thing only," he said in an interview on Cheddar Tuesday. "All their competitors are doing a million different things and leveraging different revenue streams against each other and are able to capitalize or finance their content spending."

"I think Netflix is approaching a ceiling of subscriber growth, especially here in the U.S. They're going to have to do something bold and different."

Netflix said it added just 670,000 subscribers in the U.S. for the period ending in June, about half of its own projection of 1.2 million. Internationally, the company netted 4.47 million users, less than the forecast for 5 million. Revenue, meanwhile, totaled $3.91 billion, also falling short of analyst expectations.

In a letter to shareholders, Netflix acknowledged the miss: “We had a strong but not stellar Q2," the statement said. "We over-forecasted global net additions.”

The company also tempered its third-quarter projections, saying it will bring in 5 million subscribers globallyーdown from 5.3 million, the bulk from outside the U.S.

Netflix has been investing a significant amount of cash in content creation and is expected to spend up to $8 billion this year on original programming. It seemed those dollars were paying off, when the platform received 112 Emmy nominations for its own content, breaking HBO’s 17-year streak of dominating the categories.

But Netflix did raise concerns about other players entering the field. “We anticipate more competition from the combined AT&T/Warner Media, from the combined Fox/Disney or Fox/Comcast, as well as from international players.”

“Our strategy is to simply keep improving,” the company stated.

Despite the poor earnings report, Netflix is still the biggest in the industry. Its total base of 57 million subscribers in the U.S. dwarfs Hulu’s 20 million users and HBO’s 5 million.

For full interview, click here.