Netflix warns of slower subscriber growth ahead

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Streaming giant Netflix blamed the pandemic for “lumpiness” as it predicted a slowdown in new subscriber growth on Tuesday.

Shares of the Los Gatos, California-based firm, known for hits like “Stranger Things,” “Bridgerton” and “The Crown,” sank nearly 2 percent in after-market trading.

Netflix said it brought in 1.5 million new subscribers in the second quarter, besting estimates of 1 million, but cautioned of slowing growth ahead.

“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 a letter to investors. “We continue to focus on improving our service for our members and bringing them the best stories from around the world.”

Netflix said in the third quarter, it expects to add 3.5 million subscribers, falling short of analysts’ estimates of 5.5 million.

The slowdown comes at a time when rivals like HBO Max, Disney+, Amazon Prime Video and AppleTV+ are ramping up their offerings of new movies and shows, giving the streaming giant a run for its money.

Despite the ramped up competition, Netflix said its global subscriber tally is over 209 million, much higher than any of its competitors to date.

For the second quarter, Netflix reported net income of $1.35 billion or earnings a share of $2.97 on revenue totaled $7.34 billion. Analysts had been looking for EPS of $3.16 on revenue of 7.32 billion.

Despite the hiccup, Netflix remained optimistic, as a large amount of its new slate of content had been pushed into the second half of 2021 and 2022.

The company said if it hits its subscriber forecasts, it will have added more than 54 million paid subscribers in the past 24 months, which is “consistent” with its pre-COVID annual rate of net additions.

The company called out “Sweet Tooth” a new DC comic-inspired show, as well as “Shadow and Bone,” a fantasy series based on the popular Grishaverse book series, for bringing in new subscribers in the quarter.

Netflix also touted new reality dating shows like “Too Hot to Handle” and “The Circle,” along with popular hits like “Bridgerton,” “Lupin” and “Queen’s Gambit,” for retaining customers.

Looking ahead, Netflix said it is in the “early stages” of expanding into games, citing its “Stranger Things” video game, as well as the interactive film “Black Mirror Bandersnatch.” Last week, Netflix hired Facebook and Electronic Arts gaming guru Mike Verdu to burnish its path into the lucrative video-game industry. 

“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,” the company said.

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