Netflix global growth slows after US contraction - Mobile World Live

Netflix global growth slows after US contraction

18 JUL 2019

Netflix lost customers in the US for the first time in almost a decade and missed its own forecasts for global subscriber additions in Q2, which it put down to price increases in certain markets.

The video streaming company said in a statement it lost 130,000 paying customers in the period between April and June in its home market, but described the performance as “essentially flat”. It expects to return “to more typical growth in Q3″, a trend it stated it is already seeing.

Netflix last lost subscribers in the US in 2011, due to a significant price hike and a move to separate its streaming services from its former DVD rental offering.

Missed forecast
Overall subscriber numbers in Q2 were not much better than its domestic performance. The company added 2.7 million customers in the period, missing its global forecast of 5 million additions.

Netflix said its numbers were affected “slightly more so in regions with price increases”, which refers to markets including the UK, Switzerland and other parts of western Europe.

The company also noted an expected increase in competition over the next 12 months, with Apple, Disney and WarnerMedia, among others, joining established competitors including Amazon in offering streaming entertainment.

However, Netflix does not believe competition was a factor in Q2, “since there wasn’t a material change in the competitive landscape” during the period. Instead, along with price, it believes Q2’s content slate was a factor in the slower-than-expected growth.

A strong Q1, which generated 9.6 million additions, also meant “ there may have been more pull-forward effect than we realised”.

“In prior quarters with over-forecasts, we’ve found that the underlying long-term growth was not affected and staying focused on the fundamentals of our business served us well,” the company added.

Market analyst Paolo Pescatore believes Netflix must create more blockbuster hits that attract and retain subscribers. “This will be key in its core domestic market given the launch of new services,” he told Mobile World Live. “Netflix must [also] diversify into new services and broaden its business model. It cannot solely rely on annual price increases to grow revenue and reduce its burgeoning debt and content obligations.”

Financials
Revenue hit $4.9 billion, an increase from $3.9 billion in Q2 2018, while net income shrunk to $270 million from $384 million.

On a results briefing, CEO Reed Hastings said the company still expects to end 2019 with more subscribers than it had in 2018. The company ended Q2 with 151.6 million customers.

Back

Author

Kavit Majithia

Kavit joined Mobile World Live in May 2015 as Content Editor. He started his journalism career at the Press Association before joining Euromoney’s graduate scheme in April 2010. Read More >>

Read more

Related

Tags