Streaming giant netflix stumbles?

streaming giant netflix stumbles?

Netflix is currently receiving a lot of interest for its scary series "stranger things"; the same cannot be said of the online video service’s most recent quarterly report. At least from an investor’s perspective, the numbers are also scary, but in this case, it’s anything but positive.

The weak development is also due to higher prices, but comes highly inopportune. Now, of all times, the hollywood empire and the tech stronghold silicon valley are hunting for the streaming market leader.

These figures shocked shareholders: in the three months to the end of june, netflix added just 2.7 million new paid subscriptions worldwide, according to the online video service in los gatos, california. In the USA, netflix bubbled even 130.000 customers. Investors accustomed to success are not familiar with such weaknesses – the last time the company experienced a similar flop was in 2011, when it spun off its DVD distribution business.

Netflix’s user numbers were well below the expectations of wall street experts and also below its own forecast of five million new users. All in all, the streaming giant still managed an increase to almost 152 million paid memberships at the end of the quarter thanks to gains outside the US home market. Investors reacted highly nervously and love the share fell 10 percent at the start of trading on thursday. The share price had already fallen by up to 13 percent on the previous evening.

The weak growth did not come as a complete surprise: netflix delivered relatively few hit films and series in the most recent quarter and also raised prices in a number of countries, including germany. Expectations had already been dampened, but no one had expected such a small increase in users. The company acknowledged a particularly poor performance in regions where subscription fees had been raised in the previous quarter.

In terms of financial results, however, the company’s business has been running smoothly of late: revenue was up 26 percent year over year to 4.9 billion dollars; profits topped wall street forecasts at 270.7 million dollars (241.2 million euros). This could not comfort the borsians. However, the stock has already risen by 35 percent over the course of the year, making profit-taking a good idea.

But the real acid test is yet to come for netflix anyway: after entertainment giants like walt disney followed the rapid growth of the vertical startup relatively passively for years, losing more and more cable customers to television on the internet, the counterattack is now beginning. Not only disney, but also AT&T’s competitor warnermedia with its pay-TV channel HBO ("game of thrones") and nbcuniversal have competing services in the pipeline.

The attack hits netflix twice, because the heavyweights of the established entertainment industry not only have a lot of financial power, but also coveted content. And many of them have been running on netflix for license fees so far. But because disney and co. Now launching their own online services, marvel productions and other hits are migrating to them. Netflix loses its two most successful U.S. Shows, "friends" and "the office," to direct rivals.

Nevertheless, the company is not in a bad position. Netflix has an enormous production budget – this year alone, around $15 billion has been spent on exclusive content – and has great brand potential that is far from exhausted. Fan merchandise, such as that offered by disney for its superhero films, has hardly been available from netflix for its hit productions so far.

And even though HBO – thanks mainly to the final season of "game of thrones" – clearly outshone netflix with a total of 137 nominations at this year’s emmy awards, this could only be a snapshot. In the current quarter, netflix has two superhits in the race with new seasons of "stranger things" and "orange is the new black", which could attract many new subscribers.

In view of the recent development, however, it is hardly surprising that netflix has no plans to increase revenues through advertising. The company is aware that this could scare off customers all the more. "We believe that we will operate a more valuable business in the long term by staying out of competition for advertising revenue and instead competing fully for viewer satisfaction," the letter to shareholders states.

One thing is certain: the air will soon get darker in the streaming market. Because it’s not just the entertainment giants from hollywood that want to open the hunt on netflix. Tech companies from silicon valley, such as iphone giant apple, also want to get in on the booming action. Add to that existing competitors like amazon and hulu, which also show no signs of being competitive.

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