Experts Debate Netflix’s Future After 1 Million Subscribers Drop in Q2
By Movieguide® Contributor
Netflix kicked off the entertainment industry earning season late Tuesday, and with a rocky first quarter, Wall Street analysts have examined the company’s second-quarter results, speculating on the streaming giant’s future.
Many analysts took a cautious approach to Netflix’s second-quarter report. Credit Suisse analyst Douglas Mitchelson said, “Uncertainty remains elevated for Netflix with subscriber growth stalled post-pandemic and (management) focusing on improving monetization via charging for password sharing and broadening the service’s value proposition through lower-priced ad tiers.”
The second quarter results showed that the company lost 970,000 subscribers, a little under half the 2 million that they predicted to lose. While this may be a sign that things will turn around for Netflix, their immoral content creation and promotion certainly alienate many subscribers, affecting their willingness to keep their subscription, as Movieguide® previously reported.
The company now has 220.67 million subscribers, down from the 221.6 million reported in the first quarter. That factor, reports of $17 billion for content spending and the announcement of an ad-supported subscription tier all gave Wall Street much to discuss.
According to Macquarie analyst Tim Nollen, “Some stability in subs is good, and management’s tone sounded much more reassured this time than the last two; so, Netflix stock could enjoy a short relief rally,” he explained. “But there is still some way to go to turn numbers around, while sub adds are only tracking to flat through the third quarter, and we don’t know what the effect of a recession may be on subs.”
Wells Fargo analyst Steve Cahall explained that “Content is always the heart of the stock,” but Netflix has increased “its content spend so quickly and widely” that their quality suffered. “From here, the company is notably looking to improve efficiency and efficacy. Cash content spend should stay in the $17-$18 billion zip code per year, while we think Netflix is looking to improve how it gets spent.”
Cahall contends that “this quarter will mark the beginning of a new GARPy [growth at a reasonable price] Netflix taking shape and bucked the recent trend” of financial struggle.
Others had less positive things to say. Jeff Wlodarczak, an analyst for Pivotal Research Group, believes that “the most prudent move for Netflix management is actually to look to sell the company, with recent advertising partner Microsoft (which lacks a streaming product) the most logical partner.”
He also thinks that Netflix’s new ad-supported system will “likely not increase subscriber growth in core markets.”
The stock market also showed some uncertainty. After the report’s release on Tuesday, Netflix’s stock gained in after-hours and pre-market activity, but early trading Wednesday morning showed its stock up only 1.4% at $204.41 as of 9:35 ET.
While Netflix has various methods to promote subscriber growth, they should remember that the content produced will either draw in or alienate subscribers. Many Netflix-original shows promote violence and immorality, turn-offs for many families. Likely, creating more family-friendly content would help drive up subscriber counts.
Movieguide® previously reported on Netflix’s financial losses due to immoral content:
As the most prominent streaming company in the game, Netflix never backed down from taking risks and promoting the content of all kinds to its over 220 million users.
However, promoting explicit sexual content like BIG MOUTH or CUTIES led to many outraged subscribers and even some lawsuits against the streaming giant.
After Netflix shares plummeted to their lowest point since 2018, it is clear that some subscribers are fed up with the company’s insistence on catering to immoral projects.
While CEO Reed Hastings blamed increased competition among streamers, Disney+ and Amazon Prime leading the way, it is not a stretch to assume that Netflix’s past flippancy with mature content could also contribute to its first subscriber loss in over ten years.
Now more than ever we’re bombarded by darkness in media, movies, and TV. Movieguide® has fought back for almost 40 years, working within Hollywood to propel uplifting and positive content. We’re proud to say we’ve collaborated with some of the top industry players to influence and redeem entertainment for Jesus. Still, the most influential person in Hollywood is you. The viewer.
What you listen to, watch, and read has power. Movieguide® wants to give you the resources to empower the good and the beautiful. But we can’t do it alone. We need your support.
You can make a difference with as little as $7. It takes only a moment. If you can, consider supporting our ministry with a monthly gift. Thank you.
Movieguide® is a 501c3 and all donations are tax deductible.
Now more than ever we’re bombarded by darkness in media, movies, and TV. Movieguide® has fought back for almost 40 years, working within Hollywood to propel uplifting and positive content. We’re proud to say we’ve collaborated with some of the top industry players to influence and redeem entertainment for Jesus. Still, the most influential person in Hollywood is you. The viewer.
What you listen to, watch, and read has power. Movieguide® wants to give you the resources to empower the good and the beautiful. But we can’t do it alone. We need your support.
You can make a difference with as little as $7. It takes only a moment. If you can, consider supporting our ministry with a monthly gift. Thank you.
Movieguide® is a 501c3 and all donations are tax deductible.
