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Will Netflix's Subscriber Addition Dip Heat Up Streaming War?

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On Jul 16, shares of Netflix, Inc. (NFLX - Free Report) went tumbling almost 13% in after-hours trading after the company reported second-quarter fiscal 2018 results. The reason: Netflix added fewer subscribers than it had projected. The company managed to add only 5.2 million new subscribers in the quarter, falling shy of its forecast of 6.2 million. The big question is, if 5.2 million is few, what ideally is a big number?

Netflix has been a game changer in the streaming business and is quite ahead of its competitors like Amazon.com, Inc. (AMZN - Free Report) , Apple, Inc. (AAPL - Free Report) and Hulu. An increasing number of companies are planning to launch their streaming service and are fast trying to invade Netflix’s space. While these companies need more time to steal any of Netflix's thunder, their dedication only proves that the streaming market is poised to grow and more companies will try to explore the space.

Fewer Subscriber Additions Hit Netflix  

Netflix has over the last few years impressed investors with its robust performance by adding millions of customers that has helped its revenues grow substantially. Given that Netflix had a phenomenal first quarter when it added a record 7.4 million customers, the company missing its forecasts this time around made investors press the panic button.

Nonetheless, the huge subscriber base Netflix already boasts proves the growing streaming market as it is. As of Jun 30, Netflix has 130 million subscribers, including 57.4 million in the United States. Moreover, in the first quarter, subscriber additions jumped, ignoring the company’s pushed up subscription price to $10.99 in the United States at 2017 end.

Rivals Join the Race

Amazon and Hulu, Netflix’s biggest rivals, are aggressively investing in original content. Amazon Prime already has more than 100 million subscribers, while Hulu has 20 million customers. However, other companies are fast trying to invade the streaming market, as demand for original content continues to grow. Netflix is expected to shell out $17.9 billion this year, up from $15.3 billion in 2017 on licensed content.

In fact, Netflix in a letter to its shareholders on Monday said that it is expecting stiffer competition from other streaming giants, including AT&T (T - Free Report) , which now owns HBO, Warner Bros. and CNN. AT&T has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, Apple is aggressively investing in original content and developing its own streaming service. The iPhone maker is already developing a number of TV shows, revolving around big names like Steven Spielberg, Resse Witherspoon and Manoj Night Shyamalan.

The Walt Disney Company (DIS - Free Report) too isn’t lagging and has plans of launching its streaming service in 2019. Disney is already in the process of finalizing a deal to acquire Twenty-First Century Fox, Inc.’s (FOXA - Free Report) movie and television assets, including its own one-third share of Hulu.

Summing Up

It goes without saying that the global media streaming market is poised to grow on demand for original content. Netflix definitely has been a game changer and despite positing slower subscriber growth in the second quarter, the company forecasts adding 4.35 million new members overseas and 650,000 in the United States in the third quarter. 

This definitely speaks volumes about the growing streaming market. This has seen other tech giants as well as movie studios increasingly shift focus toward the online streaming market, and aggressively investing in original content.

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