Netflix lost US subscribers in Q2 over price hikes; how can it win them back?

If you’ve been grumbling about the rising cost of your Netflix account, it seems you’re not alone. Netflix shared its second-quarter financial results and the company indicated that higher prices may have led to dips in the platform’s subscriber counts.

Revenue for the video streaming service totaled $4.92 billion in the second quarter, up 26% year-over-year. Net income was $271 million, with $0.60 earnings per share. Both those figures were down from Q2 in 2018 and from Q1 of 2019.

Netflix added 2.7 million paid members during the period, a big cut from the 5 million it expected to see and from the 5.5 million recorded in the year-ago quarter. “Our missed forecast was across all regions, but slightly more so in regions with price increases,” the shareholder letter read. The company insisted that competition from other platforms was not a concern, but rather that the shows it had for the second quarter weren’t enough to inspire people to subscribe.

The United States remains a critical market for Netflix, and the letter said that domestic paid membership was “essentially flat” for the quarter. The actual figure for Q2 was 60.1 million paying viewers in the U.S., compared with nearly 60.23 million in Q1.

The results, following closely on the news that the platform would be losing the popular sitcom Friends next year, put Netflix into a slump on the market. Its stock price fell 10.3% during trading on Thursday. Even with the biggest single-day decline Netflix has posted in three years, its shares appear to be leveling off around $315 apiece today.

If it wants to right the ship, Netflix will need to be less cagey about the competition it will be facing in the coming years. Most of the shows it is losing will be reappearing on new rival services owned by the companies that have been making bank by licensing out their programs. The arrival of a Disney streaming service, which will cover not just the huge library of animated titles from the legendary studio and its Pixar arm, but also such pop cultural icons such as Star Wars and Marvel, should be making all video streaming services at least a little nervous. Maybe that outside competition isn’t impacting results now, but it will be next year.

That said, the loss of top performers such as Friends and The Office isn’t blindsiding Netflix. The company has been gearing up for this possibility for some time, investing big bucks into a massive library of original shows. Many of the projects that are unique to Netflix are excellent. If you’re a person who puts value in awards, as investors likely do, then Netflix’s 117 Emmy nominations show that there’s greatness happening on the platform. Projects like When They See Us, Russian Doll, Black Mirror: Bandersnatch, Ozark, Queer Eye, and Nailed It are winning fans and social buzz as well as nominations. Stranger Things continues to charm the 80s child in all of us, multiple original productions are giving fresh life to the rom-com genre, and any service that scores a Beyoncé exclusive is doing something right.

But alongside those gems are some colossal wastes of money (let us never speak of A Christmas Prince 2). For Netflix to reassure its investors, it will need to make smarter decisions on what projects it greenlights.

Better content choices might also soothe some of the consumer irritation over price hikes. With its current strategy, Netflix is trying to be both your local network affiliate and the boutique cable provider. It has the syndication, sitcoms, and mainstream comfort food shows that you’d get on the former lumped in with pricey prestige productions a la HBO or AMC. And until you start watching, you don’t know which type of program you’re getting.

Upping the overall quality of the viewing experience, even if it means not having quite so many new shows, might convince more people that Netflix is worth the cost.

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