Netflix Inc. proved to the world that streaming video could be a big business. Now it will show the world what that business looks like when it hits maturity.
Netflix’s growth stage hit warp speed during the COVID-19 pandemic, then fell off in the first quarter after nearly a year of staggering growth. When the company reports second-quarter earnings on Tuesday, it has warned investors of the smallest number of net additions in its history.
While the stock plunged on that news three months ago, it should not have been surprising. Netflix has been giving hints that it was reaching the end of its early growth stage for years — from admitting that competition will take a bite to focusing more on international when U.S. growth slowed down to becoming cash-flow positive.
Netflix earnings preview: Can ‘The Witcher’ and other hot series lead Netflix to a second-half surge?
While analysts believe subscription additions will tick back up in the second half of the year, as new seasons of popular shows like “The Witcher” begin to air, it is unlikely Netflix will sport the type of subscriber growth investors have become used to. The fight is just getting harder as newer streaming services from the likes of Walt Disney Co., NBCUniversal and Apple Inc. add fresh content and continue to offer cheaper prices and free deals to woo new subscribers.
How does Netflix respond? Whatever co-CEOs Reed Hastings and Ted Sarandos do will establish what maturity looks like in streaming, and will need to generate growing revenue without counting on huge new subscriber additions to satisfy investors.
Netflix is expected to follow multiple paths.
- Raising subscription prices. Netflix raised its prices in the U.S. late last year, at least the fifth time it has raised prices on the U.S. audience. The cadence — a little less than two years since…