Horror for Netflix as it misses subscriber targets

Netflix shares plunged in after-hours trading in New York after the company’s latest results signalled it was facing stronger competition for customers.

The video streaming service’s stock lost 14% of its value after it confirmed that global subscription growth from April to June had missed management’s targets by more than one million.

It meant that Netflix, whose shares have more than doubled in value in the year to date amid a strong run for subscriber growth, was on course for the biggest drop in its market value in four years ahead of the stock exchange opening on Tuesday.
Despite this, Netflix added 5.1 million households over the three-month period – giving it 130 million subscribers overall with 57.4 million in the US and nine million in the UK. Profits and revenue beat expectations.

Image: Netflix is facing growing competition from global tech rivals and traditional providers
The company has forecast a slower rate of household subscription growth during the current quarter.
It is a crucial measurement for investors as subscriptions are key to funding the company’s investment in its own TV shows and movies, which is expected to hit $8bn (£6bn) this year alone.
The company’s growth surge has laid down the gauntlet to rivals worldwide including Apple, Amazon and Google – prompting a surge in merger and acquisition activity among traditional providers. AT&T recently purchased Time Warner for $81bn.

Disney, which is seeking to purchase 21st Century Fox’s entertainment assets in the US, is planning to launch its own streaming service.
Sky, the owner of Sky News, is also among broadcasters set to come under new ownership as part of that drive to bolster access to content.
Earlier this year, the company signed a deal with Netflix that will allow its customers to access Netflix through its Sky Q platform.

Image: Despite the gloom, Netflix did add 5.1 million households from April to June
Netflix admitted it had overestimated its second quarter subscription growth after consistently undershooting the numbers previously.

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Commenting on the reaction of shareholders Eric Schiffer, chief executive of private equity firm Patriarch, said: “Investors are devastated by Netflix’s Q2 projection that went down in dramatic flames.
“Now future projections are suspect and that decimates valuation.”

Source: Sky

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