Netflix adds over 5MN subs in ‘not stellar’ Q2 | VOD | News | Rapid TV News
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Showing exactly how high it has made the expectation bar for itself, subscription video-on-demand firm Netflix has added over five million customers in its second quarter, reported widely as something of a disappointment.
Netflix Q4 23Jan2018

For the quarter ended 30 June 2018, the SVOD leader reported that despite showing membership growth of 5.15 million customers in the three-month period, the same as in Q2 2017, this was a million down on what it had forecast in its previous financial statement.

Netflix’s growing international business was responsible for the vast majority of additions, 4.47 million, during the quarter. Such totals reflects the views of a recent survey showing that currently in the US, the cost of keeping and adding customers has resulted in spiralling marketing spend as subscriber growth falls. 

In all, Netflix now has a total of 130.14 million members worldwide, with 57.38 million in the US and 72.76 million in the rest of the world. Explaining why the subs growth was less than expected, Netflix said that it had over-forecasted global net additions as acquisition growth was slightly lower than it projected.

That said, the reported subscription growth saw a 43% year-on-year growth in streaming revenue in Q2, driven by 26% and 14% increases in average paid memberships and ASP, respectively. Operating margin of 11.8% expanded 720 bps year over year, resulting in 262% growth in operating income.

The company also revealed that currency had a $65 million positive impact on international revenue year-over-year, which would have been an increase of 13% international ASP growth on a FX neutral basis. However, this positive impact was smaller than Netflix had forecast 90 days ago as the US dollar strengthened meaningfully against many currencies since its Q1 2018 earnings report in April 2018. The company also noted that faster growth in international markets relative to the US creates a net revenue exposure to non-USD currencies.

Looking at standouts for the quarter, the company noted its original content slate which included the debut of sci-fi action series Lost in Space, which has been renewed for another season. In addition, Netflix released the second season of one of its biggest originals 13 Reasons Why, as well as Santa Clarita Diet, A Series of Unfortunate Events, Marvel’s Jessica Jones, La Casa de Papel (Money Heist), GLOW and Marvel’s Luke Cage. In original kids programming, Boss Baby: Back in Business became one of the company’s biggest kids’ series ever.

Going forward, Netflix expects the third quarter of the year to see 5.0 million global net adds, 300,000 fewer than a year ago, split 0.65 million and 4.35 million in the US and international segment, respectively. Paid net adds are forecast to be 5.2 million, up from 5.0 million in Q3 2017.

The company also said that noted that it was likely to benefit from more operator partnerships that would see its service integrated within EPGs. It cited forthcoming deals with Telefónica in Spain and Latin America as well as KDDI in Japan. While it noted that the majority of its acquisition happens by consumers signing up directly, operator bundles continued to be a high-performing additional acquisition channel for Netflix who expected to continue to add such deals with partners around the world.