Independent telecom analyst Paolo Pescatore predicted Netflix will increasingly turn to operators to enhance subscriber growth and fend off competition, after the video streaming giant’s Q2 customer additions fell short of its expectations.
Netflix added a total of 5.2 million subscribers, well behind its forecast of 6.2 million. The company missed the mark on both US and international additions, adding 4.47 million international subscribers compared with the 5.9 million predicted; and 670,000 domestic users versus a forecast of 1.2 million.
In its earnings statement, Netflix said the majority of its subscriber additions continue to come from consumers who sign up for the service directly, but acknowledged partner-based bundle offerings “continue to be a high-performing additional acquisition channel”.
Pescatore said more of those agreements will be necessary to push Netflix into its next phase of growth as it faces increasing competition from content players including Apple, Amazon, Hulu and even AT&T in the wake of its Time Warner acquisition.
“Telcos and Netflix need each other. Netflix is doing what it needs to do, solely focused on content. But it needs scale, and this is where the telcos come in, especially those that do not want to invest sums in securing costly content rights.”
The streaming service already counts T-Mobile US, Telefonica Spain and KDDI among its partners. Netflix said it expects to sign more deals with operators around the globe going forward.
Pescatore noted the company’s next step “is towards deeper integration of Netflix among telco offerings.”
Despite the lower-than-expected subscriber additions, Netflix grew total revenue from $2.8 billion in Q2 2017 to $3.9 billion in the recent quarter. Net profit jumped from $66 million to $384 million in Q2 2018.