Netflix is once again on the road to recovery, but sadly revival is not strong enough to lessen worries of investors who were planning to hike its licensing fees. Nor does it give any relief to investors from rising competition in the field of video subscription service.
Netflix on Tuesday announced its income for the second-quarter where it revealed that it has witnessed a drop of 91 percent in net income. The main reason behind the loss that the company is facing is because of TV and movie studios who demand for more money if the company wishes to continue with the service. On the other hand, it becomes difficult for Netflix to pay the increased amount from $8 per month that the company charges from its customers.
One major problem that the company is facing is that as the cost of the service of viewing unlimited amount of video over the internet has increased, the list of subscribers is going down.
Though Netflix has added 420,000 new customers in database in the last quarter, but it is way too less compared to the number of 1.8 million that it added last year. Not only this, the company has also clarified that it is going to be very difficult for them attract more customers in the present quarter, because of the Olympics. The company said that Olympics will fulfil the need of entertainment in most of the households.
Netflix Los Gatos, California based company, also signalled towards another loss that it may have to face by the end of the year. The company will have to face this loss following its decision of expansion outside the U.S. With almost, 3.6 million subscribers in Canada, Latin America and the United Kingdom, the company beared loss of $89 million in the second quarter which it is expected to increase by the year end.
“We have enormous challenges ahead, and no doubt will have further ups and downs as we pioneer Internet television,” mentioned Hastings in a letter that mentioned the results.
Netflix’s problem is not alone the losses that it is bearing but also the investors who are not happy with the company’s outcome and more importantly management’s outlook. Investors were expecting that the company will hit back in April as predicted by the management but the recent plunge of 15% in share market has raised questions.
Though, Netflix today majorly focuses on its online video services, it still offers its maiden rental service of providing DVD by mail which made the company popular. But because the company is also not doing very well in that sector it is expected to lose as many as 900,000 customers in the current quarter.
Despite all the problems, Netflix was successful in adding 26.5 million unique subscribers in its list by the end of June, which is little more from what it had in the last quarter. The company now has 30.1 million subscribers from around the world and is looking for ways in which it can make a comeback.