- Netflix’s weak second quarter sheds light on the biggest challenges that lie ahead for the streaming-TV giant.
- New competition in the US from services like Disney Plus could force Netflix to rethink its pricing strategy.
- Partnerships will be key to Netflix’s sustained growth in the US and abroad.
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The threats facing Netflix are bubbling to the surface after a disappointing earnings report on Wednesday.
Netflix fell short of expectations for subscriber growth globally, and lost subscribers in the US for the first time in eight years. The company also lost $16 billion in market value, bring its market value to around $140 billion at the close of trading on Friday, as some investors fled following the weak report.
It’s too early to say whether Netflix’s bad quarter was a minor setback during a normally difficult time of the year, or a sign of a more persistent trend. But the report did shed light on the biggest challenges that lie ahead for the streaming-TV giant.
Netflix is bracing itself for a tidal wave of new competition in the US, including services like Disney Plus and HBO Max, which eventually plan to roll out around the world as well. The increasingly competitive landscape may make it harder for Netflix to continue raising prices the way it has.
Read more about the threats to Netflix’s pricing power: Netflix could be forced to rethink its pricing strategy as new competitors like Disney Plus and HBO Max launch
As Netflix approaches a plateau in the US, it’ll continue looking overseas to make up that subscriber growth. The company announced on Wednesday that it will be rolling out a cheaper, mobile-only plan in India during the third quarter, following months of tests there.
See how Netflix is doing in pivotal international markets now: Exclusive data predicted Netflix’s weakness in key markets before its huge subscriber miss, and could hold clues about future growth
Down the line, Netflix may have to consider other sources of revenue besides subscriber fees. For now, the company made it abundantly clear that it has no plans to get into the advertising business.
Read more about how Netflix views advertising: Netflix calls speculation that it’s moving into selling advertising ‘false’
Netflix is relying on its original movies and shows, like “Stranger Things,” to draw in new subscribers. With more competition for viewers’ attention, the streaming company is ramping up partnerships with brands like Coca-Cola and Nike to build buzz for some of its biggest shows outside of its platform.
Check out Netflix’s explanation of how it thinks about brand deals: Netflix doesn’t want to ‘get distracted’ by trying to make money directly from deals with brands like Coca-Cola and Nike
Partnerships, in general, will be pivotal to Netflix’s continue growth around the world. Investors have seen deals with pay-TV providers like Comcast and AT&T in the US, and wireless and internet operators overseas as a strong sign that Netflix can grow beyond its core subscriber base.
Read more on how Netflix is growing through partnerships: How Netflix is using companies like Comcast and T-Mobile to drive its next phase of growth