What happened
Shares of Netflix (NFLX -8.77%) plummeted 25% out of the gate Friday morning after its fourth-quarter earnings report revealed slower-than-expected subscriber growth and forecast future subscriber additions that seem to be falling off the table edge. As of 10:52 a.m. ET today, its shares are down 24.06%.
Add in an otherwise disappointing earnings with profits plunging 34% to $632 million, and it seems clear the pandemic push is all but over.
Image source: Getty Images.
So what
Netflix reported it added 8.3 million new subscribers to its rolls in the fourth quarter, below management's own guidance of 8.5 million. What likely hurt even more, though, was the streaming stock announcing it expected it would add only 2.5 million new subscribers in the first quarter, or fewer than half of what Wall Street was expecting.
The rocket ship ride that launched during the lockdown phase of the COVID-19 outbreak has ended. Being stuck at home with nothing to do is a terrific fuel to spark up the TV and subscribe to a movie service. But when viewers are let out of their homes again and have almost all other forms of entertainment available once more, convincing ever greater numbers of people to subscribe becomes more difficult.
Now what
Certainly a slowdown was hinted at when Disney posted its third-quarter results back in November, adding just 2.1 million subscribers to Disney+, while other lockdown darlings like Peloton Interactive were hit from people choosing to enjoy the great outdoors instead of working out in the home.
There was always the likelihood the profusion of streaming services would lead to a broader malaise as there are only so many services consumers will subscribe to. Netflix results may be a herald of industry consolidation to come.
