Netflix Fails To Hit Subscriber Growth Goals, As Company Denies That Ads Are Coming

Streaming giant Netflix announced earnings results for its Fiscal 19 Q2 today, and as part of that, the company confirmed a massive miss for subscribers, addressed the forthcoming removal of The Office and Friends, and also reiterated that the streamer will not introduce ads.

Starting with the subscriber numbers, Netflix announced that it added 2.7 million paid subscribers during the quarter. That's down from 5.5 million new subscribers during the same period last year. It's also far below the 5 million new subscribers that Netflix forecast for Fiscal 19 Q2.

Looking ahead, Netflix said it expects to add 7 million paid memberships in the current fiscal quarter, which would be ahead of the 6.1 million new paying members that Netflix added in Fiscal Q3 2018. The release of Stranger Things Season 3 on July 4 (during Netflix's Fiscal 19 Q3) is surely baked into that ambitious subscriber growth forecast.

Despite the huge subscriber miss for the latest quarter, Netflix maintains that consumers globally continue to be eager to "move from linear television to internet entertainment at a remarkable rate."

Netflix missed its subscriber growth targets across "all regions," the company said, though it was "slightly more" in parts of the world where subscription prices went up. Competition was not a factor in the subscription increase miss, Netflix said, explaining that there wasn't a "material change" in the competitive landscape during the quarter.

Netflix had a lot of new releases during Q2, including Dead to Me Season 1, which Netflix says was seen by 30 million households over its first four days. Netflix has renewed Dead to Me for a Season 2. Also during Q2, Netflix launched When They See Us, a limited series based on the real-world Central Park Five case. Netflix says 25 million homes worldwide watched the show in its first four weeks.

The new David Attenborough nature show, Our Planet, also premiered during Fiscal 19 Q2, and it became Netflix's most-watched "docu-series" over its first four weeks, reaching 33 million homes. In terms of movies, some of Netflix's Fiscal 19 Q2 releases included the Adam Sandler movie Murder Mystery, which is the most successful of Sandler's Netflix movies to date with 73 million households watching it in its first four weeks. Other popular new movie releases on Netflix in the quarter included The Perfect Date (48 million homes over its first four weeks) and Always Be My Maybe (32 million household views in first four weeks).

A "view" according to Netflix is when an account watches 70 percent of an episode of a show or 70 percent of a movie.

Also in the earnings report, Netflix addressed the fact that it is losing two of its most-watched shows: The Office and Friends. Netflix spun the news by saying losing those shows is good because it "[frees] up budget for more original content." The shows would have been expensive to keep, as it was reported that The Office went to NBC's new streaming service for a reported $100 million per year over five years.

Netflix also spoke broadly about the wave of competition coming its way in the next year, with companies like Disney, Apple, WarnerMedia, and NBCU planning to join Netflix (and others) in the video-streaming market. "The competition for winning consumers’ relaxation time is fierce for all companies and great for consumers. The innovation of streaming services is also drawing consumers to shift more and more from linear television to streaming entertainment," Netflix said.

Netflix said it still has a lot of room to grow because currently in the United States, which is Netflix's "most developed market," the company only commands roughly 10 percent of the time people spend watching TV. The percentage is lower for streaming on mobile, Netflix said.

The company added that it will differentiate itself from some of the newcomers in that it has no plans to introduce ads. "That remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false," Netflix said. "We believe we will have a more valuable business in the long term by staying out of competing for ad revenue and instead entirely focusing on competing for viewer satisfaction."

You can read Netflix's full earnings report here.