Those watching the stock market this week might have been surprised by a major drop in one of the world’s leading streaming platforms. Netflix’s stock took a nosedive after the company revealed its subscriber information to shareholders.
This came as a surprise to many since the streaming service remains mostly competitive in a field that is beginning to become crowded, especially with its excessive push for original content over the past few years.
But why did this massive drop in Netflix stock price happen? Here is what to know about yesterday’s Netflix stock plummet.
Why did Netflix stock drop yesterday?
According to MarketWatch, the sudden drop in stock was due to an overestimation of projected subscribers in the 2nd quarter. The estimated projection given to shareholders was targeted for 5.3 million new paid members globally. The reported final number ended at 2.7 million which is roughly half of the expected projection. This led to a 14 percent dip in price which was unexpected.
Some of these factors are said to be due to the recent price increases in the service. In a conference call, CEO Reed Hastings said the cause of subscriber shortages were due to price and lack of original content 2nd quarter. Additionally, a letter to shareholders found on MarketWatch had this to say:
“We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2, and competitive intensity and our penetration is varied across regions (while our over-forecast was in every region), rather, we think Q2’s content slate drove less growth in paid net adds than we anticipated.”
As other sites have mentioned, it does not help that competition is looming in the months ahead. HBOMax is gearing up with a huge line-up and they also plan on taking Friends and The Office away from Netflix. Disney Plus will make a huge splash once it launches onto the market. These factors plus Netflix’s price increase could be contributing to fewer subscriptions.
That said, the current Quarter brought popular content like the much-beloved Stranger Things, so this could mean the service is on a comeback. Time will tell as streaming wars begin to build in the months ahead.
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