That news, delivered via the company’s earnings report this afternoon, doesn’t satisfy Wall Street investors, who pushed the stock down some 3 percent after the numbers were released.
The likely culprit is that Netflix’s projections for the next quarter aren’t what analysts expected: Netflix says it looks to add around 300,000 subscribers in the US, while investors were expecting more than 650,000.
It is tempting, and not inaccurate, to say investors have a long history of making exaggerated decisions about the value of Netflix’s stock, so that any small surprise can shoot Netflix shares up or down.
On the other hand, Netflix’s modest predictions for US growth in the next quarter reflects the fact that it is getting increasingly harder for the company to grow domestically. Those 300,000 subscribers would be a significant drop from the 850,000 subscribers it added in the same period a year ago. And in the company’s most recent quarter, it added 1.74 million subscribers in the US — down from 2.28 million the previous year.
On the other other hand, Netflix is still growing very fast outside the US, which has been the case for some time. In its most recent quarter, the company added 7.86 million subscribers, up from nearly 6 million the previous year. That’s not a coincidence: Netflix has been pushing to grow worldwide for several years, and now routinely plays up the fact that shows it makes work all around the world, no matter what country they originally came from and what language they were originally made in.
As he did three months ago, Netflix CEO Reed Hastings is using his quarterly investment letter to share selected audience numbers about some of his original shows. That’s a departure from the past, where Netflix refused to talk about viewership, but it looks as though it’s going to be a standard component for a while.
For instance: Hastings says Triple Frontier, his new action movie starring Ben Affleck, was watched by more than 52 million households in the first four weeks it was out, while The Highwaymen, starring Kevin Costner, will likely be viewed by more than 40 million households in its first months. Meanwhile, Netflix’s excellent Fyre festival documentary, which you should definitely spend 90 minutes on, attracted more than 20 million viewers.
When Netflix blasted out similar numbers last quarter, it generated grousing from traditional TV and film executives, among others, who argued that the numbers were misleading or, worse, designed to bamboozle … someone. Short of a Fyre-style fraud, though, it’s hard to see what Netflix has to gain from faking those numbers, which aren’t designed to impress Netflix subscribers (who don’t care) or advertisers (Netflix doesn’t have any of those). The main point of those numbers is to convince the Ben Afflecks of the world that stuff they put on Netflix will be seen by lots of people.
That argument will become more important this year as Apple, Disney, AT&T, and other competitors ramp up their own streaming efforts, which means they are competing for viewers’ time and money as well — and the time and effort from the Ben Afflecks of the world.
We won’t know how that’s going to pan out for some time, but, unsurprisingly, Hastings says he’s not worried. “[Disney and Apple, who both made streaming announcements recently,] are world-class consumer brands and we’re excited to compete; the clear beneficiaries will be content creators and consumers.”
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