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Netflix Inc. (NFLX) stock price has dropped 10% since yesterday as the video-streaming service sees a decline in new paid subscriptions. The possible cause could be the increasing competition in the industry.
In recent news, Netflix Inc. (NFLX) stock price saw a plunge of 10% as the company’s expectations of new subscribers didn’t meet the predictions. In the second quarter of 2019, Netflix reported the addition of just 2.7 million paid subscriptions. That is almost a half less what the Wall-Street and the company itself predicted. They were looking for 5.3 million new subscriptions with 350,000 on domestic grounds and 4.8 million internationally.
Netflix sent out a letter to all shareholders explaining that pricing increase began rolling out earlier this year, but they consider that this is not the main factor which drove the stock price decline:
“We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2, and competitive intensity and our penetration is varied across regions (while our over-forecast was in every region). Rather, we think Q2’s content slate drove less growth in paid net adds than we anticipated.”
Earlier, during an earnings video-call, the company’s CEO Reed Hastings said that there is no single factor which could lead to the decline in subscribers. Hastings along with Spencer Neumann, Netflix CFO, acknowledged that the pricing increase, the quarterly content slate, and seasonality all were the factors for the downfall.
This was the largest loss in subscriptions that Netflix has seen since the second quarter of 2016 when they lost 126,000 domestic paid subscribers compared to an expected gain of 310,000. Additionally, Netflix has 151.7 million global subscribers at the moment.
Disney is Among The Biggest Threats to Netflix
While Netflix owners say that the rising competition is not the main factor for this price downfall, many experts think differently. One of the main reasons being that Disney is planning to enter the video-streaming industry with its new platform Disney+, which is about to be released on November 12 in North America. It is rumored that the new service will be filled with many of Disney’s most popular content including multiple shows from Marvel Studios with their superhero sequels and Star Wars franchise.
While the content might not be the main part of the attraction, the price definitely is. Disney has disclosed that the price for its streaming services will be $6.99/month which is half the price what Netflix charges. Judging by Disney’s estimates, the new service could bring in around 60 to 90 million subscribers by 2024.
Moreover, Disney isn’t the only competitor for Netflix as it might seem. Apple, NBCUniversal, and AT&T’s WarnerMedia, all will announce new services during 2020.
WarnerMedia has disclosed that they will most likely “hit the market with 10,000 hours of premium content” on their streaming service HBO Max. This “premium content” might include “The Fresh Prince Of Bel-Air”, “Pretty Little Liars”, and possibly “Friends” as well. However, the price of this service hasn’t yet been discussed.
Up until now, “Friends” has been one of the number one shows that subscribers watched on Netflix. But recently Netflix removed the world’s most-watched TV series and is expected to remove “The Office” as well.
While this industry is soon to expect a massive increase in competition, some believe that nevertheless, Netflix has a huge head start when comparing to others. Netflix is known to be making lots of original content for their subscribers such as “Stranger Things” which recently premiered the third season. It attracted around 26.4 million unique viewers in the first four days.