Netflix’s skyrocketing subscriber growth during this pandemic year is expected to come to a screeching halt in the third quarter (ended Sept. 30), and going forward. That’s the consensus from Wedbush Securities media analyst Michael Pachter, who thinks the SVOD giant added just 250,000 domestic subs and 2.3 million internationally in the quarter. Netflix is projecting 2.5 million total sub additions.
While industry scuttlebutt suggests Netflix lost millions of subs due to the Cuties movie controversy, about an 11-year-old Senegalese girl coming of age in 21st century Paris against the backdrop of a religious mother and peer pressure from a group of young female dancers, Pachter thinks increased content demands from housebound subs drove churn.
The analyst contends that with the increased numbers of consumers still largely limited to home entertainment due to COVID-19, the lack of new original content will increase dissatisfaction.
“The extraordinary level of consumption of Netflix content multiplied by its large subscriber base suggests to us that some meaningful percentage of subscribers will ‘finish’ Netflix before a large quantity of new content can be produced,” Pachter wrote in a note.
The analyst believes Netflix is facing a potential loss of 2 million subs per quarter going forward without a significant increase in original content. Indeed, recent data from Nielsen found that among Netflix’s most-popular shows, 50% were network reruns.
“The law of large numbers suggests to us that if the rate of subscriber churn grows by ‘only’ 1%, Netflix could face an uptick loss of subscribers per quarter beginning later this year or early next year,” Pachter wrote. “We suspect that this phenomenon has already begun and led to the company’s lackluster guidance for Q3 net additions.”
Netflix reports third-quarter fiscal results Oct. 20.