Netflix's subscriber growth tapers off in 2Q, stock tanks

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In the wake of Netflix's earnings report, shares are trading down more than 10%.

And while earnings and revenue were largely as expected by analysts - $4.92 billion compared to an expected $4.93 billion on the latter - Netflix's worldwide subscribers grew by just 2.83 million compared to the 4.81 million analysts had predicted.

The Netflix logo is seen on a computer in this photo illustration in Washington, DC, on July 10, 2019.

Even more shocking, Netflix saw a decline of 126,000 paid domestic subscribers during the last three months.

Although the company didn't present a direct correlation, the announcement of this new strategy likely has something to do with the dismal earnings and subscriber growth report the company pushed out today.

"The competition for winning consumers" relaxation time is fierce for all companies and great for consumers, ' Netflix said in a letter to shareholders. Instead, Netflix said that a lack of major content releases in the period, coupled with hiked subscription prices, contributed to the miss.

The new David Attenborough nature show, Our Planet, also premiered during Fiscal 19 Q2, and it became Netflix's most-watched "docu-series" over its first four weeks, reaching 33 million homes.

"We think Q2's content slate drove less growth in paid adds than we anticipated", it said.

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"Netflix has a hard road ahead with looming competition and the removal of popular content, but a strong content schedule in Q3 should draw many former subscribers back in", said eMarketer forecasting analyst Eric Haggstrom.

Netflix reported diluted earnings of 60 cents a share for the second quarter on revenue of $4.92 billion.

It's hard to pinpoint a single reason for the sudden loss of subscriptions but the company has faced a steady stream of headlines warning that the addition of advertising to Netflix is inevitable - be it in the traditional service or in a separate tier.

Netflix will be losing some of its hit shows such as Friends to rival platforms being launched in the coming months, but argued that it will make up for that with original content. WarnerMedia recently decided against renewing its deal for Netflix to air "Friends" as it prepares to launch its own service, and NBC Universal is doing the same for "The Office".

"We, like HBO, are advertising free", the Silicon Valley-based company said. "That remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false", Netflix said.

Netflix has been ramping up its original content to combat these departures and keep its service a must-have. The optimism stems in part from the enormous popularity of "Stranger Things", whose third season attracted record viewership after its July 4 release.

A new "Stranger Things" role-playing puzzle game for mobile devices will be released next year. That said, Netflix told shareholders that these video games were created to promote those shows and do not signal a pivot towards gaming.

Netflix Inc said on Wednesday it would roll out a lower-priced mobile-only plan in India, tapping into a price-sensitive market where data consumption on smartphones is surging.

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