Wells Fargo analyst Steve Cahall slashed his Q3 subscriber projections by 50% due to the ”short-lived but potentially stark“ reaction to ”Cuties“
Netflix could lose several million subscribers this quarter due to the blowback against the French drama “Cuties,” Wells Fargo analyst Steve Cahall said in a report on Tuesday.
Cahall slashed his third quarter projection by 50% to 2.5 million new subscribers, while pointing to the “short-lived but potentially stark churn uptick in September due to controversy around ‘Cuties.'” The bulk of those subscriber cancellations will come from the U.S. and Canada, Cahall said, because that’s where “Cuties” received the most criticism.
Join WrapPRO for Exclusive Content,
Full Video Access, Premium Events, and More!
“We think this could weigh more heavily on third-quarter net adds than investors realize,” Cahall said, “so we reduce our estimate for global streaming net adds.”
He added: “Given how strong Netflix is as a service we’re loathe to get too negative, but our churn analysis does imply some meaningful pressure.”
Earlier this month, #CancelNetflix jumped to the top of Twitter’s trending section after right-wing U.S. politicians and others who said director Maïmouna Doucouré film sexualizes preteen girls. The hashtag gained momentum after a scene from the film, showing young girls dancing in a suggestive manner in front of adult spectators, was shared on Twitter.
Netflix is coming off back-to-back big quarters for subscriber growth — something that was amplified due to the COVID-19 lockdowns, with millions of people having few entertainment options beyond sitting on the couch and streaming. Even before the “Cuties” controversy, Netflix had expected its growth would flatten a bit during the second half of 2020. The company, in its letter to shareholders in July, said it had seen record-setting subscriber growth during the first half of 2020 but warned it didn’t expect that trend to continue during the third and fourth quarters.
“We live in uncertain times with restrictions on what we can do socially and many people are turning to entertainment for relaxation, connection, comfort and stimulation,” the company said. “In Q1 and Q2, we saw significant pull-forward of our underlying adoption leading to huge growth in the first half of this year (26 million paid net adds vs. prior year of 12 million). As a result, we expect less growth for the second half of 2020 compared to the prior year.”
More analyst notes have been trickling out as Netflix approaches its Q3 earnings report next month. On Monday, Jefferies analyst Alex Giaimo said a “potential [price] hike is probable in the near to midterm” in a note to clients. (The last price increase came in May 2019.) Giaimo said Netflix could add up to $1 billion in revenue next year by instituting a $1-2 price increase on its subscribers in the U.S. and Europe.
Doucouré complained that the blowback over “Cuties” stemmed from the initial poster Netflix used to promote the film in the U.S., which the streamer has since removed. “Using this image on its own, out of context, in effect does not allow you to understand the theme in its entirety,” she told TheWrap earlier this month, arguing that the poster created a false impression about her intentions in depicting the challenges for young preteen girls in Western society to “grow up too fast.”
Netflix’s share price was down 0.6% in early-morning trading on Tuesday, hovering near $488 per share.
20 Virus Outbreak Movies, From 'The Seventh Seal' to 'Contagion' (Photos)
Netflix and chill?
We're not saying this is inspired by recent events that fill us with terror and insomnia, but we are saying that if you happen to relate to that feeling, here's a list of very cathartic movies about virus outbreaks to get you through it. Whether you want realism, fantasy, horror or maybe computer stuff, we have you covered. Feel free to take a personal day and not leave the house while you watch. And, before you ask: This whole gallery could have been nothing but zombie movies, so we decided to limit things to just Zombie movies that make the disease aspect front and center.