Blame Netflix Troubles on Spotty Streaming Selection
The first thing to know about Netflix is that CEO Reed Hastings says the business is in good shape.
The next thing to know is that hardly anyone on Wall Street believes him.
Netflix shares toppled last night 16 percent to $85.45 after the Web video-rental service issued first-quarter earnings and projected light subscriber growth for the company’s streaming service in the second quarter. For the first three months of the year, Netflix added 1.7 million new streaming subscribers.
“The business is performing exactly as we had hoped,” Hastings told analysts following the company’s first quarter earnings report. “We’re continuing to execute on all of the key dimensions.”
Yet, the company predicts it may add as few as 200,000 new streaming customers in Q2 and at most 800,000. During the analyst call, Hastings appealed for calm and said the problem was temporary and seasonal. The second quarter is typically tough on Netflix. Skeptics, however, worry that the problems could be more lasting and have more to do with the company’s inability to secure film licenses and growing competition in the streaming-video sector.
Netflix is still the top dog in this market, but it’s lead is rapidly diminishing. I would change the title of this article - “Blame Netflix Troubles on Greedy Studio Licensing Contracts”. This reminds me of what happened in the music industry when the iTunes store opened. Right now, the studios have the upper hand, but if they don’t start making their streaming licenses more affordable they are going to lose out.