Netflix Inc.’s plans to revive its slowing subscriber growth will be in focus when it reports second-quarter results on Tuesday (US time/early morning India time), as lockdown binge-watching subsides and competition from Disney+ and HBO Max ramps up.
Netflix has forecast it would add just one million subscribers globally in the second quarter, a tenth of what it added a year ago when COVID-19 restrictions forced people to seek entertainment at home, Reuters reported from Bengaluru.
The streaming pioneer has also been losing market share to new services such as Disney+, Apple’s Apple TV+, WarnerMedia’s HBO Max and Comcast’s Peacock. To be sure, the industry’s overall subscriber growth has also slowed as the U.S. market saturates.
The Context:Some Wall Street analysts have said a first-mover advantage will only take it so far and that Netflix needs to produce new content, renew content licenses and explore other revenue sources such as live sports and advertising to turbo-charge growth.
Co-CEO Reed Hastings has long been opposed to adopting an advertising model saying it would have to compete with market leaders Google, Facebook and Amazon.
The company is exploring an e-commerce push to sell content-related merchandise and recently hired Facebook executive Mike Verdu to anchor its gaming expansion.
But analysts are skeptical about the gaming move.
“While this strategy could be marginally accretive to Netflix’s member and revenue growth, we doubt the platform would be meaningfully competitive with endemic gaming platforms or content publishers anytime soon,” said Matthew Thornton, analyst at Truist Securities.
Fundamentals:Analysts estimate Netflix’s second-quarter revenue to grow 19 percent to $7.32 billion. Revenue in North America, its biggest region by revenue, is set to increase by 13.4 percent.
Earnings per share is estimated at $3.16, while the stock, which soared 67 percent in 2020, is also the weakest performer among FAANG stocks this year.
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