Netflix will make a deeper dive into videogames as the movie and TV streaming service projects weak subscriber growth amid growing competition and the lifting of pandemic restrictions that have kept people at home.
Earnings for April to June came in at US$2.97/share, below the average forecast of $3.16, according to analysts surveyed by Refinitiv.
Netflix is weathering a sharp slowdown in new customers after a boom in 2020 fuelled by stay-at-home orders to curb the Covid-19 pandemic. In the US and Canada, Netflix reported a decline of about 430 000 subscribers in the second quarter.
The streaming video pioneer said it was in the early stages of expanding its videogame offerings, which will be available to subscribers at no extra charge. The company will initially focus primarily on mobile games.
“We view gaming as another new content category for us, similar to our expansion into original films, animation and unscripted TV,” the company said in its quarterly letter to shareholders. Netflix has dabbled in videogames with a few titles linked to hits including Stranger Things and The Dark Crystal: Age of Resistance.
Shrinking share
Some analysts have said the company that dominates streaming video needs to find new ways to jump-start subscriptions after years of rapid expansion. According to eMarketer, Netflix’s share of US revenue from subscription streaming video will shrink to 30.8% by the end of 2021, from nearly 50% in 2018.
“Netflix delivered another underwhelming quarter as competition in the streaming space heats up,” said Investing.com senior analyst Jesse Cohen. “The absence of any new looming growth catalysts has been one of the main reasons for Netflix’s relatively mild performance this year.”
The company projected it will add 3.5 million customers from July to September. Wall Street had expected a forecast of 5.5 million. For the just-ended quarter, Netflix added 1.54 million customers, beating analyst projections of 1.04 million. Total subscribers numbered 209 million at the end of June. A year ago, Netflix picked up 10.1 million subscribers in the second quarter.
This year, Netflix felt the impact of Covid-19 on TV production, which left the company with a small menu of new titles. At the same time, Walt Disney’s Disney+, AT&T’s HBO Max and other services attracted customers, and summer blockbusters returned to movie theatres. The easing of pandemic safety measures also lured people out of their homes and away from their televisions.
Netflix promises a heavier line-up in the second half of 2021, including new seasons of You, Money Heist and The Witcher.
If its subscriber forecast pans out, Netflix will have added more than 54 million subscribers over the past two years, a pace consistent with its annual additions before the Covid-19 pandemic, the company said. It also noted that streaming television still accounts for a small portion of overall viewing time and that its service is less mature outside the US. “We are confident that we have a long runway for growth,” Netflix said in its investor letter. — Reported by Eva Mathews, Akanksha Rana and Lisa Richwine, (c) 2021 Reuters
