It’s an interesting time for Netflix. While the streaming service is still in a hugely strong financial position, and able to fund a huge number of original shows and films, it’s uncertain whether it can keep up the explosive growth it’s had in the past few years.
In fact, Netflix shareholders got a bit of a fright this quarter, as the company revealed it had overestimated the number of new subscribers joining the service – with only 2.7 million new signups instead of the forecast five million.
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In a letter to shareholders (opens in new tab) (via BBC (opens in new tab)), Netflix confirmed that “Paid membership grew by 2.7m, less than the 5.5m in Q2 a year ago and our 5.0m forecast. In Q3, we expect to grow by 7m paid memberships, more than the 6.1m in Q3 a year ago.”
It’s not a death knell for Netflix by any means, but it was enough to see its share price drop by 10%, which won’t go unnoticed in the company coffers – even if the tone of the letter remains optimistic about the future, with Netflix adding: “Consumers around the world continue to move from linear television to internet entertainment at a remarkable rate.”
One of Netflix’s strategies seems to be in shaking up its existing subscription plans, with a new mobile-only streaming option to gain a larger foothold in new markets (via The Verge (opens in new tab)).
While the mobile-only plan is only being launched in India for now, Netflix will certainly be keeping an eye on how it performs, and we wouldn’t be surprised to see it rolled out to other territories worldwide too, given recent concerns over subscriber growth.
The Basic Plan for Netflix is certainly cheap, but with competitors like Disney Plus undercutting it on price, and high-profile shows like Friends leaving the service, it makes sense to offer a bargain price for those willing to use Netflix in a more restricted fashion.
In the letter to shareholders, Netflix adds: “After several months of testing, we’ve decided to roll out a lower-priced mobile-screen plan in India to complement our existing plans. We believe this plan, which will launch in Q3, will be an effective way to introduce a larger number of people in India to Netflix and to further expand our business in a market where Pay TV ARPU is low (below $5). We will continue to learn more after launch of this plan.”
With over 140 million viewers paying a monthly fee for access to Netflix’s expansive catalogue of titles, there’s no denying the streaming giant is still dominating the online landscape – but it's becoming apparent that its potential for growth is limited.
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