Why isn't Netflix adding subscribers like it once did?
The company added 420,000 unique U.S. subscribers in the second quarter, but up until last summer, Netflix was adding 1 million subscribers every quarter.
Netflix hasn't recovered from the nightmare of last summer.
That's what all the signs add up to and that's a better scenario for the company than some of the other possibilities.
Netflix reported second-quarter earnings today and said the number of U.S. unique subscribers rose by 420,000. Netflix managed to do this though the company reported losing 850,000 domestic DVD subscriptions during the quarter while adding only 530,000 subscriptions for Netflix's Internet streaming service during the period.
A subscriber can have multiple Netflix subscriptions and if someone drops the DVD plan but remains a streaming customer they aren't added to the net new subscription additions. However you want to slice it, Netflix isn't increasing the number of subscribers the way it did during the company's high-flying period between late 2008 and the summer of 2011.
That's when Netflix's golden run, when the company added at least 1 million new subscribers in seven consecutive quarters, came to an end.
Last summer, consumers abruptly turned on Netflix. They were angered when Hastings raised prices and tried to spin off the company's DVD operations. A year later and there's a case to be made that the public hasn't yet forgiven Netflix. The company simply isn't growing at the pace it once did.
In the near term, Netflix is worried that the Olympic Games this summer may sap interest in watching on Netflix and reduce signups.
Looking at the bigger picture, Netflix's streaming service doesn't appear to be taking off like many observers expected. Over and over, the company's officers have said that distributing movies and TV shows to subscribers over the Internet was the future. Consumers preferred the convenience and instantaneous gratification. They said DVDs would remain in steady decline.
There's going to be lots of guessing about what's going on and here's mine: There are still a lot of bitter feelings about the way Hastings handled the price increase and his attempt last fall to turn his DVD unit into a new company called Qwikster. Netflix scrapped the Qwikster plan but the general feeling was that the company didn't listen to customers.
I suspect the lack of relatively newer film titles available for streaming at Netflix is also holding back subscriber growth. Netflix has doubled down on acquiring streaming rights for reruns of TV shows, but I believe lots of people don't want to make the time investment involved with watching a TV series. Movies are still in demand but Netflix has struggled to acquire them.
In after-hours trading, Netflix shares fell more than $11, or 14 percent, to $69.
Correction 6:50 p.m. This story incorrectly reported that Netflix's U.S. subscribers fell in the second quarter. The company saw an increase of 420,000 subscribers in the United States. The headline was updated to reflect this correction.