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Netflix subscriber growth slows

Netflix subscriber growth slows

Rampant Netflix growth has come off the boil with fewer subscribers than expected over the third financial quarter, as the return of live sport and an increase in competition took a toll. Just 2.2m joined from July to the end of September – far off the pace set in the first and second quarters when 16m and 10m subscribers were added.

What’s happening at Netflix?

  • Netflix has been riding high on the crest of a massive subscriber spike since the start of the year, with 16m joining the fold over the first quarter alone as lockdowns took hold in countries across the world.

  • Since then the streaming provider hasn’t looked back, gaining a further 10.1m subscribers over the three months from April to June.

  • That golden age may be coming to an end however, with a mere 177,000 Americans added over the third quarter – versus three million in the spring.

  • This abrupt change in pace coincides with the relaxation of stringent lockdown measures over the summer, when Americans were able to gather outdoors once more.

  • Globally Netflix drew a mere 2.2m summer subscribers, way off the 6.7m new sign-ups registered last summer.

  • Rationalising this comparatively poor performance to its investors, Netflix blamed the dip on exhausting the available pool of potential subscribers, stating: “As expected, growth has slowed. We think this is primarily due to our record first-half results.”

Why it matters

  • As far as its bottom line is concerned Netflix exceeded expectations, drawing quarterly revenue $6.43bn – slightly above projections of $6.38bn – although earnings per share fell well short at just $1.74 versus an expectation of $2.14.

  • Netflix is facing increasingly vociferous competition from the likes of Disney and WarnerMedia which have begun siphoning off subscribers to their own platforms, Disney+ and HBOMax.

  • Acknowledging this rapidly shifting landscape in a letter to shareholders, Netflix described the present degree of competition for consumer attention as ‘vibrant‘.

  • Analysts are unlikely to be overly concerned by the slowdown, particularly as Netflix is closing in on 200m subscribers worldwide, with the official count standing at 193m.

  • Netflix‘s closest competitor Disney Plus languishes far behind with just 60m subscribers at the last count.

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