warned investors that it expected to add only 2.5m subscribers in the quarter ahead, causing a sell-off that knocked nearly 30% off its share price. On April 19th the video-streamer admitted that the reality was worse: Netflix lost 200,000 customers in the period, its first net drop in more than a decade. The firm expects to lose another 2m between April and June.
; this week Kantar, a research firm, reported that overall streaming penetration in Britain fell in the latest quarter. Consumers also have more options. Hollywood is piling into streaming along with Silicon Valley, increasing competition for both customers and content. Most worrying for Netflix is that the number of potential streaming customers may be lower than it thought. The firm has long said it is eyeing the world’s 1bn homes with broadband. It now acknowledges that factors such as slow take-up of smarts and expensive data are obstacles to reaching many of them. MoffettNathanson, a firm of analysts, puts the real potential streaming market at more like 400m homes.
Reed Hastings, Netflix’s boss, promises a crackdown on password-sharing to make some free-riders cough up. To protect margins, Netflix will rein in content spending. Most dramatically, “over the next year or two” it will launch a cheaper tier with ads, to attract customers on lower budgets. It has long rejected advertising, which risks limiting creative freedom and cannibalising existing subscriptions.
Now everything costs a lot more
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