Netflix added 1.5 million subscribers in the quarter just ended, another period of much slower growth than the leaps in popularity it enjoyed a year earlier when people around the world were stuck at home and desperate for distraction in lockdown. Though Netflix added subscribers in most regions of the world, it lost members in the US and Canada — its biggest single market — for the first time since 2019.
The company also confirmed it would expand into gaming, offering mobile video games at first on its existing service at no added cost to subscribers.
Netflix, the world’s dominant streaming video subscription service, said subscribers grew by 1.54 million to 209.2 million total between April and June, according to its second-quarter results released Tuesday.
That narrowly beats Netflix’s April guidance that it would add 1 million new members, which analysts’ consensus expectation basically matched, according to Thomson Reuters. But Netflix’s guidance for the third quarter that it expects to add 3.5 million members paled in comparison with the 5.5 million new members that analysts anticipated Netflix would predict.
“COVID has created some lumpiness in our membership growth (higher growth in 2020, slower growth this year),” the company said in a letter to shareholders.
Netflix’s growth slowed to a trickle earlier this year, after the company enjoyed surges in popularity from people hungry for entertainment during pandemic lockdown last year.
Even though its ambitious production schedule kept the service stocked with new titles through much of 2020, COVID-19’s delays to movie and TV production finally caught up with Netflix this year, and its cadence of new material was much lighter in the first half than it was a year before. And Netflix had long warned that some of the surges in its membership may have pulled forward demand, essentially reeling in subscribers earlier than would they would have joined otherwise. That set up the potential for dry spells, like the one that seems to be playing out now.
Netflix has also faced a wave of competition from new rivals like Disney Plus and HBO Max, as media and tech giants have launched their own services to take on Netflix as television transitions to a future of streaming.
Shares in Netflix fell 1.5% to $523 after hours. Through the close, Netflix stock had fallen 1.3% so far this year, underperforming the market at large.
In the US and Canada, its biggest single region, Netflix lost 430,000 streaming customers, for a total of nearly 74 million. It’s a rare membership loss for Netflix, which last posted a loss of US members in 2019. Before that, it hadn’t happened since 2011.
In Europe, Middle East and Africa, the company added a slim 190,000 members. In Latin America, its membership increased by 760,000. And in the Asia Pacific region, the area with the most growth, Netflix added 1.02 million members.
Overall, Netflix reported a profit of $1.35 billion, or $2.97 a share, compared with $720.2 million, or $1.59 a share, a year earlier. Revenue rose 19 percent to $7.34 billion.
Looking ahead to the third quarter, Netflix predicted $2.55 per share in earnings in the third quarter. On average, Wall Street analysts who track Netflix expect $2.17.
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