The news: Netflix’s second-quarter earnings show a company still trying to get on solid ground after its Q1 report shocked the streaming industry and sent the company on a desperate reimagining of its business model.
Still shedding subscribers: Netflix’s Q2 subscriber loss may not have been as bad as expected, but it's still a worrying sign for a company that relies entirely on subscription revenues.
AVOD update: Netflix is focusing on an ad platform to help make up for its stalling growth and revenue losses, but there’s no guarantee that a cheaper, ad-supported option will resolve churn issues.
Analyst insight: "Netflix's subscriber loss was expected, but it remains a sore point for a company that is wholly dependent on subscription revenue from consumers,” said senior analyst Ross Benes. “Given demand from brands, its advertising product will likely boost average revenue per user eventually. But there's no evidence yet it will lessen opt-outs or meaningfully bring in more subscribers."
The big takeaway: Netflix’s extremely high market penetration means its subscriber growth was bound to stall eventually.