Netflix's reliance on big hits will be a hurdle for future growth
Netflix's ambition is to replace television — to be the thing you turn on out of force of habit as you sink into your couch, whether or not you really have any idea what you want to watch. With a large enough library, and detailed enough data about your viewing preferences, Netflix should always be able to find something to entertain you.
Driving the news: The company disappointed the market with its second-quarter earnings report this week. International subscribers grew more slowly than anticipated, while the number of U.S. subscribers actually fell.
- Subscriber growth will return in the third quarter, thanks in large part to season 3 of "Stranger Things." The lesson here is that Netflix needs a steady stream of new hits if it's going to keep on growing.
- In Hollywood, no one can predictably manufacture a new hit every quarter. The more that Netflix is reliant on hits for future growth, the less excited Wall Street is going to be about the company.
The other side: Netflix kept substantially all of its U.S. subscribers even after hitting them with a 20% subscription-price hike. Even if a higher sticker price made it harder for Netflix to attract new subscribers, existing customers seem to be extremely loyal to the brand.