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Netflix falls on slowest growth
The stock slide
The stock is down more than 40% over the past year. Investors have grown increasingly worried about Netflix's ability to grow since its failed bid last year for Warner Bros. Discovery's film and TV studios and HBO Max.
Engagement concerns
Netflix has acknowledged that it needs to address slowing viewership growth and offer more US programming, according to the Journal's reporting. The company watches subscriber engagement closely, meaning the amount of time subscribers spend watching its shows and movies. Engagement has declined this year, depending on how it is measured, and the Journal's sources describe it as a source of concern.
New bets
Over the past five years Netflix has pushed into games, and more recently into video podcasts and work with creators.
How does Netflix make its money?
Netflix earns most of its revenue from monthly subscriptions, with prices that vary by plan and country. In November 2022 it launched a cheaper plan that shows advertisements, adding ad sales as a second source. The company spends heavily on producing and licensing shows and movies. Revenue growth depends on adding members, raising prices, and keeping people subscribed.
Why do investors watch engagement so closely?
Engagement is a leading indicator of churn, the rate at which subscribers cancel. People who watch less get less value from the service and are more likely to leave. Cancellations hit revenue directly, and replacing a lost subscriber costs money in marketing. A drop in viewing time can therefore show up in the numbers months before a drop in subscribers does.
Why does streaming growth slow as services mature?
A service that has reached most of the households that can afford it has fewer new customers left to sign up. Netflix passed 300 million paid memberships by the end of 2024. Growth then has to come from price increases, advertising, and new product lines. Games, live events, and creator content are among the areas the company has tried.
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