While Netflix may be one of the biggest media corporations in the world today that doesn’t mean that it’s invincible. The service is currently dealing with the costs of high expectations.
On July 17th the company announced that in the second quarter of 2018 the service had added 5,200,000 new subscribers. While there are plenty of companies that would be over the moon at the idea of having 5.2 million subscribers in total, Netflix isn’t like most companies. The company is a true media juggernaut that has been growing at incredible rates, and because of this, they expected to add around 6 million subscribers. This means that they fell almost one million subscribers behind their target this quarter, which explains why the Netflix stock took a hit in the days following the news.
It’s important to understand that while Netflix has a lot of money coming in, they’re also spending an incredibly large amount of money on new content. In early July they announced that they’d be spending $13 billion dollars on new content, which is up $5 billion from the figure they announced at the start of the year.
Netflix currently dominates the American streaming content market, but it’s facing stiff competition and a quickly changing landscape. Many have noted the fact that every year the selection of movies seems to thin out, along with the TV shows that aren’t Netflix originals. It’s not that Netflix is intentionally purging programming it didn’t create, the companies behind this content are removing it to try and maximize profits.
Many companies are developing their own streaming services to compete with Netflix. The service already has to deal with Hulu, Amazon Prime, and HBO GO, but there are more on the way. YouTube is creating original content for its premium streaming service, Disney is creating a service, Walmart wants to create a streaming service, and even DC Comics is setting up a service for its film and TV content.
Netflix might not be going away any time soon, but the service is in a bit of an awkward spot right now. They have set up their business plan to generate and deal with incredible growth, but right now it looks like they might be faltering behind their goals. They’re dominant in the US but struggling to catch on in international markets where they might not have what the customers are looking for. One of the reasons for their $13 billion dollar content budget is the desire to create products that appeal to consumers in every market Netflix is trying to enter. It’s an ambitious goal, but these tepid results might suggest that Netflix has stretched themselves out to thin.