Net­flix slow­down: Sig­nal of turn of tide in streaming?

Chicago Tribune (Sunday) - - BUSINESS - By Mae An­der­son

NEW YORK — How much is too much for streaming video?

A dra­matic slow­down in world­wide growth at Net­flix — in­clud­ing the first quar­terly drop in its U.S. sub­scribers since 2011 — is rais­ing ques­tions about just how much are peo­ple will­ing to pay for streaming ser­vices. Es­pe­cially with a host of new ones from Dis­ney, Ap­ple and oth­ers on their way.

A re­cent price in­crease seems to have spooked Net­flix sub­scribers. The com­pany lost 126,000 sub­scribers in the U.S., less than 1% of its 60.1 mil­lion paid U.S. sub­scrip­tions, dur­ing the April-June pe­riod. Its most pop­u­lar plan rose from $11 to $13 in a U.S. price hike an­nounced in Jan­uary and rolled out for many sub­scribers dur­ing the sec­ond quar­ter. World­wide, the ser­vice picked up 2.7 mil­lion world­wide sub­scribers, far be­low Net­flix’s fore­cast of 5 mil­lion.

“Net­flix rais­ing prices prompted peo­ple to think about whether they were get­ting value for money,” Wed­bush an­a­lyst Michael Pachter said.

While peo­ple are will­ing to shell out for sev­eral ser­vices to meet their streaming needs, he said, they’re also will­ing to can­cel if they’re not us­ing it enough, just as they would with a gym mem­ber­ship or mag­a­zine sub­scrip­tion.

Streaming ser­vices pre­par­ing to com­pete with Net­flix may be tak­ing note.

Dis­ney Plus, set to de­but in No­vem­ber, will al­ready be cheaper than Net­flix at $8 a month, though Dis­ney Plus will also have a smaller video li­brary. Hulu has cut prices to $6 from $8 for its main, ad-sup­ported ser­vice. Ser­vices from Ap­ple, due out this year, and Warn­erMe­dia and NBCUniver­sal, out in 2020, don’t have an­nounced prices yet, although the NBCUniver­sal ser­vice will be free and ad sup­ported for tra­di­tional cable TV sub­scribers.

Of course, even if th­ese in­di­vid­ual ser­vices are cheaper than Net­flix, it’s not clear how many con­sumers will be will­ing to pay for them. One way to make a ser­vice ap­peal­ing is not through bet­ter prices but through ex­clu­sive shows and deep li­braries, in­clud­ing shows that Net­flix will be los­ing. Net­flix’s two most pop­u­lar shows, “Friends” and “The Of­fice,” will be de­part­ing in the com­ing months for ri­val ser­vices.

Group M an­a­lyst Brian Weiser said that for now, other ser­vices shouldn’t be overly con­cerned by a weak quar­ter or two at Net­flix. He said streaming con­tent con­sump­tion is still grow­ing rapidly, so the over­all mar­ket has plenty of room for com­peti­tors.

“I don’t think it fol­lows that if Net­flix has an un­der­per­form­ing quar­ter that tells you about oth­ers,” he said.

Some an­a­lysts also be­lieve Net­flix’s trou­ble is tem­po­rary. Canac­cord Ge­nu­ity an­a­lyst Michael Gra­ham said the sub­scriber num­bers will likely hit the stock in the short term, but over­all the com­pany’s growth re­mains on track, par­tic­u­larly over­seas.

The spring quar­ter is typ­i­cally slug­gish for the ser­vice, and Net­flix ac­knowl­edged weak con­tent could have been re­spon­si­ble for the drop. It ex­pects to re­gain some mo­men­tum this sum­mer, pro­ject­ing that it will add 7 mil­lion sub­scribers from July through Septem­ber. The op­ti­mism stems in part from the popularity of “Stranger Things,” whose third sea­son at­tracted record view­er­ship af­ter its July 4 re­lease.

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