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Netflix thought it would have 5 million new subscribers this quarter. Instead it added 2.7 million.

And that’s before it loses Friends, The Office, and other shows and movies made by its Big Media rivals.

Ben Affleck in Netflix’s “Triple Frontier.”
Ben Affleck in Netflix’s “Triple Frontier.”
Melinda Sue Gordon/Netflix
Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

Netflix expected to add 5 million subscribers in the second quarter of 2019. It didn’t come close. The streaming video giant only added 2.7 million.

Those numbers would be great news for lots of streaming services that intend to compete with Netflix, but not for CEO Reed Hasting, who depends on producing go-go subscriber additions every three months to keep Wall Street happy. After those numbers came out, Wall Street dropped the value of Netflix shares by 10 percent.

Netflix is used to seeing its stock fluctuate. More alarming may be Hastings’s explanation for the drop, expressed in a letter to investors: “We think Q2’s content slate drove less growth in paid net adds than we anticipated.”

Translation: We thought more people would like the stuff we make, like Triple Frontier, and the stuff we buy from other people, like The Office.

Things are going to get much tougher for Netflix over the next year, as competitive streaming services from Disney and WarnerMedia roll out — and these competitors pull back some of the popular titles they currently license to Netflix, like Friends and the Marvel movies, which they want to run on their own services.

The good news, Netflix says, is that it thinks its Q2 miss is simply a Q2 miss, not a sign of things to come. The company thinks it will add 7 million subscribers in the third quarter — more than Wall Street expected it to predict — driven in part by a new season of Stranger Things. And it has new movies coming from Martin Scorsese (for people who like arty gangster movies) and Michael Bay (for people who like to see things blow up).

And it insists it will do fine as rival services start up and take their stuff back from Netflix’s catalog: “From what we’ve seen in the past when we drop strong catalog content ... our members shift over to enjoying our other great content.” Netflix currently has 151 million paid subscribers worldwide (158 million if you include free trials).

One thing that’s not coming to Netflix next quarter — or ever — Hastings says, is ads. That’s not news: Hastings and his executives are always asked about this and they always give the same answer. But this is the first time I can remember them spelling this out in an investors letter: “We, like HBO, are advertising free. That remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false. We believe we will have a more valuable business in the long term by staying out of competing for ad revenue and instead entirely focusing on competing for viewer satisfaction.”

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