Netflix started out as a company that sends DVD by mail in 1998 then shifted to streaming in 2007. The American global provider of streaming and television show then expanded the service to over 190 countries after its successful shift in business.
But now, Netflix is facing harsh times because the United States subscriber category is slowing down. The company is encountering challenges with only 160,000 additional American subscribers for the second quarter of 2016. Since its launch in digital streaming and internet video service, that number has been the lowest growth rate since five years ago.
Aside from the stunted subscription growth rate, reports indicated that Netflix is experiencing tight competition when it entered international expansion. After the release of the company's second quarter earnings, CEO Reed Hastings cited the disappointing cancellations by subscribers. Reed pointed out that the price increase of $2 monthly struck a chord with its subscribers.
"People don't like price increases, we know that," Hastings said during a webcast reviewing the second quarter. "It is a necessary phase we must get through."
In business, the higher the prices go, the more competition Netflix will get. It was estimated that more than 20 million subscribers will be hit with a price increase until the end of the year. Netflix has not forecasted how many of its subscribers will be affected but the company strongly believes that it will only hit the 300,000 mark in subscriptions for the third quarter compared to 880,000 from last year's record.
Netflix was considered to be a First Mover. Now, they no longer have that advantage. Competitors are offering internet only services like Amazon, Youtube and Hulu with TV Networks like HBO and CBS introducing online alternatives to their cable and broadcast channels.
"Media companies are thinking a lot more about what the real value of their content is and what they should be getting to license it to Netflix. That is going to make content licensing a lot more expensive for them," says Andre Swanston, CEO of Tru Optik.