Netflix subscriptions fall for the first time

It's been almost a decade since Netflix jumped into streaming content, and ever since that original debut, it added new members in droves. For the first time this quarter, it lost 130,000 subscribers—the first drop ever, adding up to 2 million less than expected.

What went wrong? Well, Netflix did raise prices significantly in the last year from $10.99 to $12.99 per month, a risky bet, given that the magic number in subscription-services has always hovered around $10. In the same quarter, Netflix rolled out similar hikes globally—and every region shrank:

“Our missed forecast was across all regions, but slightly more so in regions with price increases,” the company said in announcing results. Netflix said it didn’t believe competition was a factor for the subscriber miss: “Rather, we think Q2’s content slate drove less growth in paid net adds than we anticipated.”

According to Variety, Netflix blames a poor slate for the drop in subscribers, rather than those subscription jumps. It's true, there were no new breakout hits, and Stranger Things 3 (one of the most popular shows) didn't arrive until this quarter.

My feeling? Investors are freaking out too soon—one blip on the radar isn't indicative of a trend, yet, and every company can have a quarter or two of stumbling. What is telling, however, is that Netflix subscribers are much more sensitive to price than the company might have expected, and investors are nervous that the content wars are about to heat up.

In the latter of 2019 or early 2020, Disney, NBC (The Office, Friends), Apple, AT&T/HBO and a plethora of others are getting into the streaming game—and Netflix will lose a huge amount of content. If consumers are spooked on content, it's about to get much worse, and Netflix's pricing is being undercut across the board.

What is in Netflix's favor, is it appears to be a powerhouse at creating new, sticky original content. Disney, NBC, HBO and others are relying on the power of nostalgia to drive their services, and in the long term, that doesn't seem like as safe of a bet as new ideas, rather than re-hashed old ones. What I would like to start hearing is how many users are reactivating, which is likely to grow over time.

Is Netflix in trouble? Probably not. But, it is a red flag—if the trend continues. Until then, no need to panic. 

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