Netflix, emerging from a bumper crop of subscribers fueled by a pandemic in 2020, added just 1.5 million customers globally for the second quarter of 2021 – a significant slowdown from its previous pace of steamy growth.
The company has also officially revealed its intention to enter the video game market, seeing it as a new category that will help it attract and retain customers. Netflix said the games will be included in the monthly subscription price for its main service.
During the second quarter, Netflix lost subscribers in its key region of the United States and Canada, recording a net loss of 430,000 paid streaming customers in the region. Overall, the company slightly exceeded its previous overall forecast, which estimated 1 million net additions overall with “flattened” customer totals in North America and Latin America.
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The slight increase in subscribers for Netflix in the most recent quarter – and its loss in the United States and Canada – comes after record subscriber additions in 2020, driven by lockdowns from COVID-19. At the same time, the company has faced a new horde of streaming competitors who are also fighting for market share, including Disney Plus, HBO Max, Peacock, Discovery Plus and Paramount Plus.
The Asia-Pacific region accounted for roughly two-thirds of Netflix’s worldwide net paid additions in the second quarter.
“We believe that our large base of members in [the U.S. and Canada] coupled with a seasonally smaller acquisition quarter is the main reason “for its loss of subscribers in the region, the company said in its letter to shareholders. Netflix noted that in the second quarter of 2019 it had lost around 100,000 paying subscribers in the United States and Canada and since then “we have added almost 7.5 million net paid additions to UCAN.”
For the second quarter, Netflix reported revenue of $ 7.34 billion and earnings per share of $ 2.97. This slightly exceeded analyst consensus estimates for $ 7.32 billion in revenue, but fell short of earnings as Wall Street expected EPS of $ 3.15 , by financial data provider Refinitiv.
Netflix shares fell about 1% in after-hours trading.
On the gaming front, Netflix said it was “in the early stages of gaming expansion, building on our earlier efforts around interactivity (e.g. Black Mirror Bandersnatch) and our games. Stranger Things ”.
“We see games as another new category of content for us, similar to our expansion into original films, animation and unscripted television,” the company said in the Q2 letter to investors. “Games will be included in members’ Netflix subscription at no additional cost similar to movies and series. Initially, we will mainly focus on games for mobile devices. We are more excited than ever with our film and TV series offering and expect a long track of increasing investment and growth in all of our existing content categories, but since we are nearly a decade into our push in the original lineup, we think time is right to learn more about the value our members place on games.
Last week, Netflix announced it hired video game veteran Mike Verdu, formerly at Oculus Studios and Facebook’s EA, as vice president of game development. Verdu reports to COO and Product Manager Greg Peters.
With subscriber growth slowing, Netflix has stepped up its initiatives to generate additional revenue streams including merchandise, live events, and potentially VR content.
Netflix identified new competitors in its Q2 letter, including TikTok, but said its main competitor is “ourselves” as it strives to improve service. The company has always broadly defined its competitive set.
“In the race to entertain consumers around the world, we continue to compete for screen time with a wide range of companies like YouTube, Epic Games and TikTok (to name a few). But, above all, we compete with ourselves to improve our service as quickly as possible. If we achieve this, we are confident that we can maintain our strong position and continue to grow well as we have been over the past two decades. “
Citing recent industry consolidation – including the planned merger of WarnerMedia and Discovery and Amazon’s bid for MGM – Netflix said in the letter to shareholders that it did not believe M&A activity had affected his growth a lot, “if at all”.
And Netflix said it had not identified any “convincing” merger of acquisition targets. “While we continually assess opportunities, we do not see any asset as ‘must have’ and have yet to find one on a large scale convincing enough to act,” the company said.