Apparently, things are not looking so good for Netflix: actually, its most recent earnings report was quite dismal. Last quarter, the streaming media company suffered its first major loss of US subscribers: about 126,000. That is far from the 352,000 new subscribers analysts had expected. But Netflix also missed its global subscriber growth by fifty percent, adding only 2.7 million paid customers.
With that, Netflix stock fell more than 10 percent, signaling a very uncertain future for a company whose growth is solely dependent on subscriber growth. More importantly, this development raises new questions about how much more spending the company can endure.
On a post-release earnings call, Netflix executives emphasized subscriber growth is healthy in the international markets. Indeed, the abysmal numbers only seem to be registering in the United States. Actually, nearly one-hundred percent of the company’s new subscribers were from international markets, and CEO Reed Hastings comments they still have lots of room to grow there.
He notes, “There are about 700 million households that pay for TV outside of China—the equivalent of the US hundred million—and that’s one established market. Do we have enough content in each of those countries? The internet is capable of some very large customer bases.”
On the same call, Netflix executives took a lot of time discussing the outlook in India, where they expect to see massive growth. India is relatively new and, more importantly, is still an unsaturated streaming market, but Netflix has had a little trouble breaking to develop content. But with five new India-based originals on the way, they should find it a little easier to sway that market.
Surely, some of these offerings will find some ground in the US market, but Netflix has had a lot of luck with international programs, lately. Germany’s “How to Sell Drugs Online,” Denmark’s “The Rain,” and Sweden’s “Quicksand” have all been able to draw between 12 and 15 million global viewership. Obviously, that means Netflix has the ability to not only cater to specific national audiences but members from all over the world as well.
So it is just a matter of finding the right content at a time when the US market may be overwhelmed. Combine close US market saturation (particularly from new streaming services from Disney and WarnerMedia) with escalating membership fees, and it is easy to see why the company is succeeded everywhere except the US.