Netflix’s sizzle reel needs to impress

Netflix badly needs the second half of the year to go better than the first. Investors are already betting that it will.

The video streaming pioneer has seen anemic subscriber growth in the first six months of 2021, with a little over 5.5 million net new subscribers added in the period. That was well below the 25.9 million added in the same period last year, fitting with the company’s frequent warnings that mass lockdowns early in the Covid-19 outbreak pulled forward a significant amount of future growth. But this year also has been slow compared with the company’s pre-pandemic performance. First-half subscriber additions averaged about 10.6 million in the years 2015-2019. Subscriber growth in the first half of this year has been the lowest for Netflix since 2013 when it had about one-sixth its current base of 209 million subscribers.

Wall Street is betting on a turnaround. Analysts project about 12 million net new subscriber additions in the second half of this year, with growth returning to a more normalized pace in 2022, according to FactSet. Netflix shares, which had been in a slump this year through its most recent quarterly results in July, have jumped 12% since that report.

Can Netflix deliver? Analysts for Evercore ISI count 60 pieces of original programming hitting the service in the last four months of this year. That will include new seasons of popular shows such as “The Witcher” and “Cobra Kai” in December. A new season of the Spanish-language hit “Money Heist” comes out in two parts, with the first having launched on Sept. 3, and the second going out in December.

Justin Patterson of KeyBanc Capital Markets predicts that “Money Heist” will boost international subscribers in the third quarter due to its popularity in markets such as India and Latin America. He expects the content slate in the fourth quarter to help with the North American market, where Netflix still generates its highest average revenue per subscriber. “Seinfeld” also comes to Netflix on Oct. 1. That program aired its last episode more than 20 years ago, but popular older TV series can still draw a lot of eyeballs. Nielsen reported that “The Office” was the most streamed program on any platform in 2020.

But Netflix will still have to stand out in an increasingly crowded streaming environment. Marketing spending has averaged 8% of revenue for the last six quarters—well below its pre-pandemic average of 14%. Analysts expect a big jump in the fourth quarter to a record $953 million, 12% of projected revenue for the period.

Netflix also is planning its first-ever “Global Fan Event” on Sept. 25 where the company will spend three hours previewing upcoming releases for this year and next. it will include peeks at new seasons of blockbuster shows such as “Stranger Things,” “Bridgerton” and “Ozark.” Such a sizzle reel can excite investors as well as viewers; Disney shares jumped more than 13% the day after its Dec. 10 analyst meeting last year that included aggressive new streaming targets plus an extended look at upcoming programming.

But Netflix is a more expensive stock, trading around 55 times forward earnings after touching a new all-time high last week. Eric Sheridan of Goldman Sachs started coverage of Netflix with a neutral rating on Monday, noting that “user growth trajectory will likely be the key driver of stock performance.”

Its new programs had better click. Live Mint