Netflix Stock Drops, Subscription Growth Projected to Slow
Netflix stock has been up and down lately, and it’s easy to understand why. Before the infamous summer of 2011, people always spoke very highly about Netflix, its ability to maintain steady growth, and the company’s desire to expand its streaming service into international markets. After a series of serious and unfortunate missteps — including the short-lived decision to split its DVD and streaming services into two separate entities — the company can’t seem to catch a break. Even with a strong ending to the first quarter, stocks still dropped during after-hours trading on Monday.
Investors seem a little concerned about a forecast that suggests subscription growth will slow during the second quarter, despite the fact that Netflix added nearly 1.7 million members since the beginning of the year. Traditionally, April through June has been a particularly slow time for the company in terms of drawing new subscribers into its fold. Analysts projects that Netflix will only add a paltry 200,000 new users during the 2Q, a fact which may have caused the company’s stocks to take an estimated 16 drop yesterday.
First quarter revenue, however, was up 21% from last year.
CEO Reed Hastings is hoping to combat the subscription issue by focusing on original content, a strategy which includes bringing the cult television series “Arrested Development” back for another full season. Unfortunately, this particular show doesn’t start production until sometime this summer, which means that Hastings and company will have to wait until sometime next year to see if their pricy gamble will pay off.
The company’s recent problems haven’t stopped Hastings from taking home an incredible amount of money as compensation for hurting the company’s reputation. Between his stock options and his regular salary, Hastings will reportedly bring home nearly $9.3 million. Not bad for a guy who alienated his subscribers by increasing their monthly rates and confusing the bejesus out of everyone by attempting to split the company into two entities.
All of this bad news is going down right as other companies are looking to take a section of the market away from Netflix. Amazon, Wal-Mart, and Comcast are offering streaming services, though none of them has the selection that Netflix currently offers.
For the time being, anyway.