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Netflix’s Cracked Gong

Netflix's forecast missed expectations

Image source: Kaspars Grinvalds - Shutterstock, Giphy

What's going on?

More people than ever are Netflix and chilling – but on Thursday, the company missed analysts’ fourth-quarter revenue estimates, sending its stock down 4% (tweet this).

What does this mean?

Netflix’s subscriber growth continues its march. Last quarter, it added 1.5 million more paying customers in the US and another 7.3 million elsewhere. Although both that and profit beat expectations, revenue of $4.5 billion fell short of forecasts. What’s more, Netflix’s revenue and profit forecasts for this quarter were below investors’ expectations too – following up one disappointing blockbuster with an even sorrier sequel.

Why should I care?

For markets: Spending like it’s going out of fashion?

Evidence on Tuesday suggested that, despite rising interest rates, US consumer lending is growing. If people are borrowing more, that means they may have more to spend on life’s luxuries. But consumers flocking towards Netflix perhaps aren’t paying full-price right away – discounting is all the rage, after all. And outside the US, the average Netflix subscription is cheaper than within – so more new international subscribers at the expense of Americans could lead to lower revenue than expected. At any rate, Netlfix’s lofty subscriber growth prediction suggests that demand for streaming hasn’t peaked yet.

For you personally: A battle for your eyeballs.

Netflix’s 60-odd million US subscribers will soon be paying almost 20% more than a year ago to zonk out with a box set. The company has already amassed a large pile of debt and expects to continue burning through more cash in 2019 as it maintains its frenetic production of original (and increasingly critically acclaimed) programming to keep ‘Flickers binging. More money for more shows will be necessary to stave off ever-stiffer streaming competition, not just from the likes of Amazon (which has picked up a few awards of its own) but also, as of later this year, Disney+. The forthcoming launch has already stripped Netflix of several popular Disney-owned shows.

Originally posted as part of the Finimize daily email.

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