Subscriber Growth Slows at Netflix

Netflix missed its subscriber growth forecast for Q2, adding just 2.7 million as compared with the 5.5 million added in the same period last year and the 9.6 million new customers in Q1.

The streamer had projected 5 million new additions for the second quarter. It ends the period with 151.6 million paid streaming memberships worldwide. Its forecast for Q3 is 7 million net additions. Revenues for the period were up 26 percent to $4.9 billion with a net income of $271 million.

“Our missed forecast was across all regions, but slightly more so in regions with price increases,” the company said in its letter to shareholders. “We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2, and competitive intensity and our penetration is varied across regions (while our over-forecast was in every region). Rather, we think Q2’s content slate drove less growth in paid net adds than we anticipated. Additionally, Q1 was so large for us (9.6 million net adds), there may have been more pull-forward effect than we realized. 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.”

U.S. revenues were $2.3 billion from 60.1 million subscribers, down from 60.2 million in Q1. International revenues were $2.5 billion from 91.5 million members, a net gain of 2.8 million.

Netflix reaffirmed its ad-free proposition in its shareholder letter. “That remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false. We believe we will have a more valuable business in the long term by staying out of competing for ad revenue and instead entirely focusing on competing for viewer satisfaction.”