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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 also officially revealed its intention to enter the video game market, starting with mobile games, seeing it as a new category that will help it attract and retain customers. “[W]e think the time is right to learn more about how our members enjoy the games, ”he said announcing the second quarter results. Netflix said the games will be included in the monthly subscription price of its basic service.
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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 had estimated 1 million net additions overall with “flat” customer totals in North America and Latin America.
The slight increase in subscribers for Netflix in the last 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 gained around 1 million subscribers, which is roughly two-thirds of Netflix’s global paid net additions in the second quarter. LatAm added 760,000 and Europe, the Middle East and Africa registered 190,000 new submarines.
“We believe that our large membership base 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.”
The company ended the second quarter with 209.18 million paid streaming subscriptions, projecting net additions of 3.5 million for the third quarter (up from 2.2 million in the third quarter of 2020).
For the second quarter, Netflix reported revenue of $ 7.34 billion, up 19.4% from the previous year’s quarter, and earnings per share of $ 2.97. This slightly exceeded analyst consensus estimates for $ 7.32 billion in revenue, but fell short on the earnings front as Wall Street expected EPS of $ 3.15, by financial data provider Refinitiv.
Netflix shares fell about 0.2% after-market on Tuesday after the earnings report.
In the first half of the year, Netflix said it spent $ 8 billion in cash on content (up 41% year-over-year). For the year as a whole, the company is forecasting content depreciation of around $ 12 billion, up 12% from 2020. As usual, Netflix has touted a considerable number of movie views and original television series including “Army of the Dead” and “The Mitchells”. vs. The Machines ”- but using its own metric that counts viewers who aired at least two minutes of a title.
On the gaming front, Netflix said it was “in the early stages of its expansion into games, building on our earlier efforts around interactivity (e.g. Black Mirror Bandersnatch) and our games. Stranger Things “.
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.
Netflix plans to make games based on its original TV shows and movies, as well as introduce completely new games and license some titles, Peters told investors during the second quarter earnings interview.
“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.
With subscriber growth slowing, Netflix has stepped up its initiatives to generate additional revenue streams including merchandise, live events, and potentially VR content.
In the second quarter interview, Netflix co-CEO Reed Hastings was asked about adjacent new areas that will become big profit pools. Hastings replied, “None of them – they’re not designed to be.” These initiatives aim to “improve the great service we have,” he added. “We are truly a one-product company. “
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.
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