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  • Writer's pictureLes Heintz

Media Insider Roundup: What a Mess! Netflix to Report Earnings This Week:

There's a lot of white-knuckle hand wringing going on in advance of Tuesday's 2Q earnings report from Netflix. For good reason. The streamer is in trouble.

By: Les Heintz & Media Insider Staff Writers

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Not too long ago Netflix was the darling of Wall Street, but those days seem to be gone. At least for now.

Netflix will reveal its financial results from the second quarter on Tuesday afternoon, and the outlook is... to be kind... bleak at best!

The streaming giant is having an awful year.

Back in April, Netflix warned investors that it expects the subscriber defections to clock in at 2 million. Netflix stock is down 69% this year even after a rare 8% rally on Friday.

The giant streaming service prepares to report fresh financials shortly after Tuesday's close this week. Everyone will be watching Netflix, especially now that it has proven mortal after recent layoffs and missing its own subscriber guidance in three of the past five reports.

Whatever happens Tuesday could reshape the future of the company as well as the entire streaming sector. As goes Netflix, so goes streaming.

Here's a great piece on what's at stake from Dade Hayes at Deadline

Here is an interesting take from Todd Spangler at Variety. The story quotes Wall Street analysts who speculate that Neflix subscriber losses will be lower that the projected 2 million.

One insider the new season of the hit series "Stranger Things" will pull Netflix' ass out of the fire... at least partially. The analyst projects a narrower Q2 net loss of 1.5 million subscribers and that company will forecast a gain globally of at least 1 million.

We're not sure we buy into that, but the piece is worth reading just the same... especially if you own stock in Netflix!

Netflix is pinning its furture on an interesting savior given its history: advertising.

The company announced Wednesday that it will partner with Microsoft on a new, cheaper ad-supported subscription plan. Despite Reed Hastings, Netflix's CEO, being opposed to the idea for years, advertising is now a major part of Netflix's plans to boost revenue going forward. The new tier will reportedly come before the end of 2022, but Netflix admits its nascent ad business is in its "very early days."

Our Take: What ever happens this week, we find it hard bet against this company. It's important to remember that this is the same Netflix that launched in 1997 as a mail based DVD subscription service. Back then Netflix was considered the upstart to the industry leader (wait for it) Blockbuster video!

Today Netflix is the 900 lbs gorilla of the streaming industry. We expect the company to adapt to the current industry dynamics just as it did when DVDs started to become obsolete.

Conventional thinking blames the loss of Netflix subscribers on competition and inflation. But we believe there is something more fundamental at play here. Netflix needs to take a long look in the mirror. It's platform has become too big, too complicated and too onerous for its customers to navigate. The only platform in worse shape is Amazon Prime... which is a story for another day.

The Microsoft advertising deal will help the bottom line. But make no bones about it: Netflix is at a crossroads. It needs to learn from its history and adapt to the viewing and delivery needs of its customer base.

Otherwise Netflix could become just another Blockbuster Video!

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