In the age of digital streaming, it is no debate that Netflix has pioneered the way for the adoption of streaming services over cable TV. Despite this fact, Netflix expects to add a smaller number of subscribers this quarter than a year ago. This change is due to growing competition and disruptions from COVID-19. 

After the success of Netflix, many different entertainment corporations began launching their own streaming services, such as Walt Disney Co.’s Disney+, Viacom CBS Inc.’s Paramount+, and AT&T Inc.’s HBO Max. While Netflix seems to struggle in adding new subscribers, competitors like Disney+ and Paramount+ are experiencing a bump in app downloads and user engagement due to new big shows and movies dropping. Hits like Disney’s Hawkeye and The Book of Boba Fett as well as Paramount’s Clifford the Big Red Dog and Mayor of Kingstown have caused increased user engagement. 

Despite experiencing an increase of 2.5 million subscribers in the current quarter, Netflix continues to underperform compared to its past statistics, such as the 4 million per financial quarter in the prior year. Similarly, Netflix missed their estimate for one quarter, amassing 8.3 million subscribers rather than the projected 8.5 million. 

In after hours trading, Netflix stock fell 20% due to underwhelming statistics. This drop has not been uncommon for streaming services recently, as Netflix’s main rival Walt Disney Co.’s Disney+ was down 3.4%. 

Though Netflix continues to release a strong lineup of content, such as new seasons for the hit TV shows The Witcher and You as well as new movies like Don’t Look Up, which broke the company record, the user engagement still remains under the mark of where they strive to be. 

Despite the lack of new subscribers, existing Netflix subscribers are enjoying the new content being released. 

“I loved the new season of You and the new Netflix movie Don’t Look Up! I hope they keep releasing quality content like this in the future,” said Arcadia High School sophomore Addison Kwan. 

When discussing the current decline, Netflix chairman and co-chief executive Reed Hastings admits that subscriber rates have “not yet accelerated to pre-COVID levels” and that an “ongoing COVID overhang” with economic difficulties in several countries has led to decreased engagement. 

Despite the current decreases in subscription rates, Netflix executives remain hopeful for the future. Executives still continue to predict a big end of year finish, with action-packed movies like Red Notice and The Adam Project releasing and hit shows like Bridgerton returning.  

“We have so much content coming in Q4 like we’ve never had,” stated Hastings. 

Analysts credit Netflix’s inability to exponentially grow in the past to their lack of live news and sports. In spite of this, Netflix is still predicted to have a positive cash flow for all of 2022 and continue to grow on the international front as they experience increased engagement in Europe, the Middle East, and Africa. 

Photo courtesy of Souvik Banerjee