Netflix Reports Slower Subscriber Growth in Q2

Netflix reported 1.54 million net subscriber additions in the second quarter for a total of 209.2 million paid memberships globally.

The streamer recorded an 8.4 percent year-on-year growth in subs, down from 13.6 percent in Q1. “Covid has created some lumpiness in our membership growth (higher growth in 2020, slower growth this year), which is working its way through,” the company said in its letter to shareholders.

Revenues in the period were up 19 percent year-on-year to $7.3 billion, with a net income of $1.3 billion.

In the U.S. and Canada, revenues were $3.2 billion from 73.95 million customers, down from the 74.4 million customers reported in Q1.

EMEA revenues were up to $2.4 billion from 68.7 million customers, a slight gain on the 68.5 million in Q1.

LatAm customers also rose, to 38.7 million, with revenues of $861 million.

AsiaPac revenues grew to $799 million from 27.9 million customers, reflecting a gain of 1.02 million subs, about two-thirds of global paid net additions in the period.

Key originals in the period included Shadow and Bone, with 55 million member homes tuning in its its first 28 days, and Sweet Tooth, with 60 million homes tuning in. Non-scripted also fared well, thanks to titles such as Too Hot to Handle, The Circle and The Sons of Sam. On the film front, Zack Snyder’s Army of the Dead was seen by 75 million member homes in its first 28 days and Fatherhood by 74 million homes.

Season two of Lupin was Netflix’s biggest non-English title in the quarter with 54 million member households watching in its first four weeks. From Spain, Elite drew 37 million member homes and Mexico’s Who Killed Sara? attracted 34 million.

The streamer said it is expanding into games, which will be available as part of the subscription package at no additional cost. Mobile games will be the focus of the initial investment.

Addressing the competitive streaming environment, Netflix noted, “We are still very much in the early days of the transition from linear to on-demand consumption of entertainment. Streaming represents just 27 percent of U.S. TV screen time, compared with 63 percent for linear television, according to Nielsen. Based on this same study, Nielsen estimates that we are just 7 percent of U.S. TV screen time. Considering that we are less mature in other countries and that this excludes mobile screens (where we believe our share of engagement is even lower), we are confident that we have a long runway for growth. As we improve our service, our goal is to continue to increase our share of screentime in the U.S. and around the world.”

The streamer also addressed the intense chase for scale in the media business. “The planned combination of WarnerMedia and Discovery and Amazon’s pending acquisition of MGM are examples of the ongoing industry consolidation as firms adapt to a world where streaming supplants linear TV. The industry has consolidated materially over the years and we don’t believe this consolidation has affected our growth much, if at all. While we are continually evaluating opportunities, we don’t view any assets as ‘must-have’ and we haven’t yet found any large scale ones to be sufficiently compelling to act upon.”