The second-quarter subscriber loss that was better than expected soothed investors, but a closer look at the streaming giant's results show it still faces significant hurdles.
The subscriber numbers were half as bad as the company predicted. The company projected a return to subscriber growth. The positive sentiment lifted other media stocks, including Walt Disney Co.
In the quarter, the company lost 970,000 subscribers around the world. Password sharing is being cracked down on and a new lower-priced tier is being launched to generate more revenue.
The market commentator wrote in a post on his site that the service is not good.
The company has lost subscribers in the US and Canada as well as in Europe and the Middle East. There has been growth in subscriber numbers in Asia, but there have been price reductions in India. In the current quarter, the company expects 1 million new subscribers. According to Third Bridge, the forecast may be overly optimistic.
The competition is still going strong. The August release date for "House of the Dragon" is related to the hit show " Game of Throne". The Lord of the Rings: The Rings of Power will be available on Amazon Prime. The fourth season of "Stranger Things" renewed interest in the service, but analysts are unsure if the company can continue to spend money on new shows the way it has in the past.
MoffettNathanson senior analyst Michael Nathanson said in a research note that the company will need to slow down their content spend as they pivot into a new era of slowing top-line growth.
The roll-out of the ad-supported tier is expected to happen early in the future. Analysts are questioning the strategy. The new option may not increase subscriber growth in core markets and may even push down the company's average revenue per user, according to the research group.
Executives tried to assure investors that initiatives such as advertising, the introduction of video games, as well as a move to charge customers extra for accounts at second homes and with related subscribers will reignite the one-time high flyer.
The company is confident that it can return to hyper revenue growth in the future.
Ryan Vlastelica helped with the project.
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