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Netflix Idea Proposal (NFLX)

Netflix Idea Proposal (NFLX)
 

Was Netflix’s Q2 subscriber debacle a short-term blip or a major red flag?

Report Available: September 12, 2019

 

Blueshift’s ongoing research found NFLX badly missing its subscriber growth forecasts in Q2. The company blamed its own content slate and predicted a return to robust growth in the second half of the year. But there are questions about whether recent price hikes and the glut of available content are making consumers think twice before subscribing. NFLX will be trying to rebound just as some major competitive threats from DIS and T are launching.

 

Observations

  1. Shares of NFLX fell more than 10% after the company reported disappointing global subscriber numbers for Q2, including the first decline in U.S. paid subscriptions since 2011. Company executives blamed the results on the streaming video giant’s slate of original content during the quarter and predicted a bounce back in Q3 as new seasons of popular series like Stranger Things kick off. The company had a similar setback in the second quarter of 2018 but rebounded strongly over the next three quarters.
  2. NFLX hit customers with its biggest price increase ever in January, bumping its most popular plan in the U.S. from $10.99 to $12.99 per month. NFLX executives said they do not believe the price hikes were the major catalyst for the Q2 subscriber shortfall, but acknowledged that their forecasts were off more significantly in regions where there were price increases. Some observers suggested NFLX might be suffering because TV viewers are overwhelmed by content options. New research from NLSN suggests that when video streaming subscribers don’t know what they want to watch, they’re almost twice as likely to tune into their favorite broadcast television channel rather than browse through the menus of their streaming services.
  3. NFLX will be trying to regain its footing just as some of its most anticipated competitive threats start to take shape. DIS’s new streaming service, Disney+, will launch in November. In advance of rolling out its $6.99-per-month streaming service, DIS is starting to remove some of its content from NFLX, including popular Stars Wars and Marvel films. Meanwhile, T announced that it will launch a new over-the-top TV service in Q3 called AT&T TV. And following its acquisition of Time Warner, T is also rolling out HBO Max, which will offer live TV as well as Warner Bros. shows, taking back content from NFLX like the hit show Friends. With competition rising and some of its most popular library content stripped away, NFLX is continuing to pour money into producing original shows and movies. NFLX’s content spending will reportedly approach $18 billion in 2020, with the company planning to spend $520 million alone on three big-budget movies, including The Irishman, a Martin Scorsese film starring Robert DeNiro, Al Pacino and Joe Pesci.
  4. Content owners, distributors and other sources in Blueshift’s Dec. 5, 2018, report said big challenges to NFLX’s dominance were on their way but competitive threats were not expected to dent the streaming video giant’s subscriber growth in 2019. The landscape could look significantly different by 2020, with offerings from DIS, AAPL and T. One source said NFLX could continue raising prices to around $20 per month.

 

What caused NFLX’s disappointing subscriber totals in Q2? What role did recent price hikes play? Will NFLX rebound in the second half of the year? Will Disney+ have an immediate impact on NFLX? Will NFLX start to feel a pinch from competitors like AT&T TV? If so, when? Will NFLX be hurt by the loss of popular content to DIS, T and CMCSA? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Content owners, Content distributors, and Industry specialists.  

 

Companies: Netflix Inc. (NFLX), Apple Inc. (AAPL), AT&T Inc. (T), Comcast Corp. (CMCSA), Walt Disney Co. Inc. (DIS)

 

Research Begins: August 26, 2019

 

To see other ideas Blueshift Research is currently working on, please click here.

 

Blueshift Research’s sister company, Intro-act, has launched the Intro-act Scorecard, the C-suite’s standard, ongoing measure of corporate investor engagement.

 

The Scorecard optimizes the ROI on corporate access by measuring: Concentration, Directionality, Breadth, Impact, Depth, and Duration

 

See the sample Scorecard. Watch the Scorecard video.