Second quarter Netflix subscription numbers disappoint

Netflix’s latest earnings report shows signs of stagnation: the streaming giant added 5.2 million subscribers during its second quarter this year, the same amount it gained a year earlier.

The company added 670,000 subscribers in the US and 4.5 million internationally in its second quarter. Revenue came in at $3.9bn, up from last year’s $2.8bn, while net income for the quarter was $384m, and increase from $66m the year prior.

The subscriber numbers failed to meet analyst expectations. Analysts polled by FactSet expected Netflix to add 6.2 million subscribers total, with 1.2m coming from the US and 5.01 internationally. The numbers also failed to meet Netflix’s own forecast, as it also predicted an addition of 6.2 million subscribers for this quarter.

In an earnings release, Netflix admitted to having a “strong but not stellar Q2.” However, the company took the opportunity to brag about overtaking HBO in the Emmy nomination race this year, breaking the latter’s 17-year run.

Paul Verna, eMarketer principal analyst, commented: "After four consecutive quarters of beating its own guidance, and analysts’ expectations on key metrics such as revenues, profits, and subscriber gains, Netflix disappointed with a weak Q2 2018. This is isn’t entirely surprising given rising competition in the video streaming market, where Amazon, Hulu, HBO and others are gaining share of subscription video dollars at Netflix’s expense. The market is also heating up with new entrants in the SVOD space, including Disney and AT&T."

He added the expectation that despite the weaker-than-expected results, the company was expected to continue to be the leading video streaming service across the US.

"Netflix has a strong slate of original content that should keep it in the forefront among streaming services, and it plans to continue outspending the competition to develop TV programming and feature films. This is critical in an era when people increasingly choose streaming services on the strength of their content."

It was estimated by eMarketer that Netflix would have 147.5 million individual users this year, an increase of 11% over 2017 and that it would capture nearly 74% of US OTT video users.

Netflix now has a total of 130 million memberships worldwide. Last quarter, it added 7.4 million new subscribers, a 50% gain year-over-year.

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