Analyst: Netflix Q2 Sub Loss Might Not Be as Big as Everyone Thinks

Netflix has projected it expects to report a net loss of 2 million global subscribers for the fiscal period ended June 30. The sub loss comes on top of a 200,000 net loss in Q1, which resulted in the streamer’s stock price plummeting 70%.

Michael Pachter, media analyst with Wedbush Securities in Los Angeles, doesn’t think the projected Q2 sub loss will be so high.

Why?

The streaming behemoth has riding high on the success of “Stranger Things,” and specifically the staggered release of season four — which has topped viewing charts industrywide.

“While it is possible that the company will once again issue downbeat guidance for Q3, we think that the staggered release dates limited churn at quarter end and once again, Netflix is likely positioned to grow,” Pachter write in a note.

Netflix co-CEO and chief content officer Ted Sarandos turned the industry on its ear in 2013 when the streamer began releasing all episodes of an original season on its debut. Access to all episodes quickly led to the social phenomenon known as binge viewing.

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But as the SVOD market has become saturated and services raise prices, the appeal of binge viewing has also increased subscriber churn, or members not renewing their monthly subscriptions.

So Netflix, like other platforms, has begun to stagger the release of episodes on original programming, most notably award-winning “Stranger Things” and “Ozark.”

Specifically, Pachter believes Netflix saw a global net streaming loss of 1.5 million subscribers (total subs to 220.14 million), as Netflix drove incremental viewership with Stranger Things 4 and likely limited churn by splitting up the content dumps between Q2 and Q3. Given the strong viewership over the course of Q2, the analyst contends subscriber numbers will beat low expectations set by management.

“We think that the sooner the company shows its commitment to reducing churn by releasing its new content over several weeks, investors will see an uptick in net new subscribers and investor confidence in the Netflix business model will be restored,” Pachter wrote.

Netflix reports Q2 fiscal results July 19 after the market close.