Netflix Growth Sputters in Q2, Streamer Plans to Launch Video Games for No Extra Charge

With the slowdown in subscriber growth, Netflix has stepped up initiatives to cultivate additional revenue streams, including merchandise, live events and potentially VR content.
The company has always broadly defined its competitive set. Netflix identified new rivals in its Q2 letter, including TikTok, but said its main competitor is "ourselves" as it works to improve the service.
Verdu reports to COO and chief product officer Greg Peters. Last week Netflix said it hired video game veteran Mike Verdu, formerly at Facebook's Oculus Studios and EA, as VP of game development.
Citing recent industry consolidation — including the planned merger of WarnerMedia and Discovery and Amazon’s bid for MGM — Netflix said in the shareholder letter that it doesn't believe the M&A activity has affected its growth much, "if at all."
Overall, the company slightly topped its previous overall forecast, which had estimated 1 million net adds overall with customer totals "flattish" in North America and Latin America. During Q2, Netflix lost subscribers in its key U.S./Canada region, posting a net loss of 430,000 paid streaming customers in the region.
Netflix, coming off a pandemic-fueled bumper crop of subscribers in 2020, added just 1.5 million customers worldwide for the second quarter of 2021 — a significant slowdown from its previous torrid pace of growth.
Netflix shares were down about 1% in after-hours trading.
On the gaming front, Netflix said it's in "the early stages of further expanding into games, building on our earlier efforts around interactivity (eg, Black Mirror Bandersnatch) and our Stranger Things games."
and Canada — come after record-breaking subscriber additions in 2020, driven by COVID-19 lockdowns. The light subscriber gain for Netflix in the most recent quarter — and its loss in the U.S. At the same time, the company has faced a new horde of streaming competitors also fighting for market share, including Disney Plus, HBO Max, Peacock, Discovery Plus and Paramount Plus.
Initially, we’ll be primarily focused on games for mobile devices. "Games will be included in members’ Netflix subscription at no additional cost similar to films and series. "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 the Q2 letter to investors. We’re excited as ever about our movies and TV series offering and we expect a long runway of increasing investment and growth across all of our existing content categories, but since we are nearly a decade into our push into original programming, we think the time is right to learn more about how our members value games."
That slightly topped analyst consensus estimates for $7.32 billion in revenue but fell short on the earnings front, as Wall Street had expected EPS of $3.15, per financial data provider Refinitiv. For the second quarter, Netflix posted $7.34 billion in revenue and earnings per share of $2.97.
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If we can do that, we’re confident we can maintain our strong position and continue to grow nicely as we have been over the past two-plus decades." But, we are mostly competing with ourselves to improve our service as fast as we can. "In the race to entertain consumers around the world, we continue to compete for screen time with a broad set of firms like YouTube, Epic Games and TikTok (to name just a few).
and Canada] coupled with a seasonally smaller quarter for acquisition is the main reason" for its loss of subscribers in the region, the company said in its shareholder letter. Netflix noted that in Q2 2019, its lost about 100,000 paid subs in U.S./Canada and since then "we’ve added nearly 7.5m paid net adds in UCAN." "We believe our large membership base in [the U.S.
Netflix said games would be included as part of the monthly subscription price of its core service. The company also officially unveiled its plans to enter the video game market, eyeing it as a new category that will help it attract and retain customers.
The Asia-Pacific region represented about two-thirds of Netflix's global paid net adds in Q2.
And Netflix said it has not identified any "compelling" merger of acquisition targets. "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," the company said.

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