Netflix shares plunge as streaming company sees 'hiccup' in subscriber growth

The company's total monthly customers reached 130 million worldwide, 1 million fewer than forecasts from Thomson Reuters, as it added new programming including "Lost in Space" and new episodes of Marvel's "Jessica Jones" and "13 Reasons Why". First of all streaming services could be approaching saturation point for now.

Foxtel executives are this morning witnessing light at the end of a tunnel with news that consumer engagement with arch rival Netflix is slowing.

But Netflix missed its target badly in the April-June period, causing its high-flying stock to plummet by about 14pc to $345.63 (€294.63) in extended trading.

With more than 56 million domestic subscribers, or about 1 out of every 6 people in the States with an account, Netflix had already been heading towards a saturation point at home. The company has said it plans to spend $14 billion on shows and movies this year.

"These are still millions of new subscribers, even if they didn't meet the expectations that might have been set by the last two quarters, which were extraordinarily high", he said.

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Looking ahead to the third quarter, the company is calling for $0.68 in EPS on $3.99 billion in revenue. Netflix's marketing budget increased 92 percent since the same time previous year, hitting $526 million for the quarter. For the first time, Netflix generated more revenue outside the U.S.: global revenue totaled $1.92 billion and U.S. revenue was $1.89 billion for Q2.

"Netflix is in a business that varies by quarter anyway and perhaps the company shouldn't have gotten too enamored with the insane success of the last two quarters, which was invigorating but not sustainable", Forrester analyst James McQuivey said.

What is not clear is where the hurdles to that unbroken run of growth will come from, be it stronger competition from Amazon Prime or the changes in control of major film and TV franchises heralded by Walt Disney and Comcast's bid for Twenty-First Century Fox.

At the same time, Netflix faces growing competition. Apple Inc is pouring money into original programming, signing up A-list names including Oprah Winfrey. But the landscape is increasingly looking more like an unbundled version of the old cable model-dozens of channels from Netflix to CBS to Showtime, each with their own monthly fee.

"Our strategy is to simply keep improving", Netflix said.

  • Michelle Webb