Whatâs Going On Here?Netflixâs first-quarter subscriber growth came in worse than expected late on Tuesday, and the streaming service wouldnât like to thank its parents, its agent, or â sniff â its investors. What Does This Mean?Hereâs the trouble with pocketing a record number of subscribers last year like Netflix did: it sets a high bar for every subsequent earnings announcement. Too high, this time around, with the streaming service only adding four million new subscribers last quarter â two million less than it promised. And too high this quarter as well, by the sounds of things: Netflix admitted itâs expecting to add just a million subscribers versus a predicted 4 million. That matters because new subscribers are a proxy for future income, so while the lower costs of delayed production did push profit over expectations, unimpressed investors initially sent Netflixâs stock down 10%. Why Should I Care?For markets: Accountants are sneaky.
Thing is, Netflixâs profit doesn't even account for the full cost of making content, which is spread over a few years even though the company generally pays for everything up front. Investors, then, prefer a figure Netflix canât obscure with accounting quirks, like how much cash it brings in each year. Or rather, how much it doesnât bring in: the streaming giant hasnât made enough cash to cover costs in almost any year since 2012. Thatâs a tradition itâs promised to end this year, but it might be easier said than done when production fully ramps up againâŠ
The bigger picture: These endless US streaming wars.
Still, a recent survey by Morgan Stanley found that 39% of Americans think Netflix has the best original content of all the streaming services â well ahead of Amazon Prime (12%) and Disney+ (7%) (tweet this). And this update aside, investors seem to agree that the world needs more Emily In Paris: Netflixâs shares have risen about 80% since Disney+ launched, dwarfing the average 15% gains of its competitors. | 