Jul 21, 2019

Netflix's reliance on big hits will be a hurdle for future growth

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Data: FactSet; Chart: Axios Visuals

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.

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Netflix looks abroad for continued growth as more competitors emerge

Illustration: Sarah Grillo/Axios

Efforts to dethrone Netflix abroad are underway, as more money pours into upstarts looking to compete locally against the streaming giant.

Why it matters: Netflix's user base is nearing saturation in the U.S., so it needs to continue growing abroad if it ever wants a chance at profitability.

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Podcast: The battle to dethrone Netflix

Dan and Axios' Sara Fischer dig into the future of streaming, as Netflix is under pressure both at home and abroad.

Go deeper: Netflix rival in Southeast Asia raises $50 million

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The evolution of media consumption

Chart: Chris Canipe/Axios

The media consumption wars are heating up.

The big picture: After decades in which media consumption was dominated by domestic TV, we're entering a much more fragmented and international world. Services like Netflix and TikTok (the mobile video clip app that aspires to be the next Netflix) are global in scope and ambition. That sets them apart from forthcoming rival subscription services being planned by Disney, Comcast and AT&T.

Go deeperArrowJul 21, 2019