The Real Problem with Netflix's Streaming Numbers - Not Much to See

Is anyone truly surprised that Netflix’s streaming numbers disappointed Wall Street? Because it’s not a surprise to Netflix customers as to why the company is barely adding a meaningful level of streaming subscribers. There is hardly anything worth watching.

Earlier this week, Netflix reported in its third quarter earnings that it added 1.2 million streaming subscribers , near the low end of its prediction that it would add between 1 million and 1.8 million this quarter. As a result, the company lowered its forecast for 2012 streaming adds to between 4.7 million and 5.4 million, below its earlier forecast of 7 million streaming customers added this year. The company counted 25.1 million total U.S. streaming customers at the end of the third quarter.

Wall Street responded as Wall Street should and would to missed guidance - by trouncing the stock. But what’s most surprising is the reaction of analysts. In a Reuters story Pacific Crest Securities analyst Andy Hargreaves said: “The pace of adoption of streaming video in general, and Netflix specifically, appears likely to be meaningfully slower than we previously anticipated.” Other analysts echoed the concerns about marketplace adoption.

Let’s acknowledge there are lots of things going on at Netflix beyond streaming , as the company expands overseas and girds for video competition from the likes of Verizon, Amazon and Comcast. But let’s dig into the issue of why streaming numbers aren’t growing quickly, because I don’t think it’s about consumer adoption.

I’m a Netflix streaming-only subscriber and earlier today I went to the site to check out some movies I’ve been wanting to see or to see again. Take The Breakfast Club. It’s not available for instant watching. Along the lines of clubs, I’ve never seen Fight Club but have always wanted to. It’s not on instant streaming. A few weeks ago I had looked for Apollo 13 and it’s not available to stream. Last week, I’d searched for Bill and Ted’s Excellent Adventure. You can’t stream it either.

This scenario repeats in different homes all around the country. I hear it from friends. I hear it from readers.

I don’t mind paying to rent these movies on iTunes, or even buy them in some cases. Because the value proposition is clear on that service. You pay. You get something. I don’t even mind that Amazon Prime has a limited selection of video titles because I don’t use Amazon for the streaming. If Amazon has the show or film I want to stream, great. If not, I’ll still order the camera battery that I need or the honey badger halloween costume my kid wants from Amazon.

So if you want to know why Netflix’s streaming numbers disappointed, the answer has nothing to do with consumer adoption of streaming. The Olympics, the Red Bull space jump, and the regular consumption of TV shows online have proven that consumers are adopting streaming.

The answer to Netflix’s numbers has everything to do with content, or lack thereof.

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2 comments about "The Real Problem with Netflix's Streaming Numbers - Not Much to See".
  1. Doug Garnett from Atomic Direct , October 25, 2012 at 12:57 p.m.
    It's all about the programming - no matter how cleverly neat you make the interface. And, so, perhaps the MSO's have the true upper hand in all this (despite their often clumsy attempts to leverage that advantage)...direct access to the most and best content.
  2. Jonathan Mirow from BroadbandVideo, Inc. , October 25, 2012 at 1:10 p.m.
    Yeah - Netflix has sort of de-evolved to the level of the local drive-in: all the cheesy horror movies that don't make it to Fear.net and all the T&A comedies that Cinemax won't buy. I like a lot of their stuff, but I wonder how long this can continue with nothing but Gore / Anime releases....