Even though it finished the quarter with almost 210 million paid memberships, slightly ahead of its forecast, alarm bells are ringing for Netflix after its second quarter 2021 results showed subscription growth, especially those in the US, slowing markedly.
Basically, for the quarter ended 30 June 2021, the subscription video on demand leader posted revenues of $7.342 billion up 19.4% year-on-year. Operating income jumped 25.2% on an annual basis to $1.848 billion, with net income for the quarter totalling $1.353 billion.
Yet despite the rise in revenue, all eyes have been on the subscriber numbers. At the end of quarter, Netflix had 209.18 million global streaming paid memberships, up 8.4% compared with the end of the second quarter of 2020, but a rise of just 1.54 million compared with Q1 2021. The previous two quarters had seen additions of 8.51 million and 3.98 million respectively.
The company’s APAC region represented about two-thirds of its global paid net adds in the second quarter and by contrast Q2 paid memberships in the US and Canada (UCAN) region were slightly down sequentially, down by 400,000 on a net basis. Netflix said that its large membership base in UCAN coupled with a seasonally smaller quarter for acquisition was the main reason for this dynamic. It added this was similar to what it experienced in Q2’19 when its UCAN paid net adds fell by 100,000. Since that time the company added nearly 7.5 million paid net adds in UCAN.
When it announced its Q1 results Netflix cautioned that while it anticipated a strong second half with the return of new seasons of some of its biggest hits and “an exciting” film line-up, there would be a lighter content slate in the first half of 2021, and hence slower membership growth. Overall it predicted paid net additions of 1 million for the second quarter of the year, compared with 10 million in the quarter a year ago as the effects of the pandemic were being felt.
The company says pandemic has created ongoing “unusual” choppiness and lumpiness in its growth and has distorted year-on-year comparisons as acquisition and engagement per member household spiked in the early months of Covid.
Going forward, for the third quarter of 2021, Netflix forecast paid net additions of 3.5 million, compared with 2.2 million in the prior year period. Netflix said that it achieved its forecast, it will have added more than 54 million paid net additions over the past 24 months or 27 million an annualised basis over that time period, consistent with its pre-Covid annual rate of net additions. The company was confident of hitting a 20% operating margin for the full year of 2021, compared with 18% in 2020.
As it attempts to address any worries on growth, Netflix announced in its Q2 results that it was in the early stages of further expanding into games, building on earlier efforts around interactivity for series such as Black Mirror Bandersnatch and Stranger Things. The company said that it regarded gaming as another new content category, similar to its expansion into original films, animation and unscripted TV. Going forward, Games will be included in members’ Netflix subscription at no additional cost similar to films and series with the games business initially primarily focused on mobile devices.
Yet despite the rise in revenue, all eyes have been on the subscriber numbers. At the end of quarter, Netflix had 209.18 million global streaming paid memberships, up 8.4% compared with the end of the second quarter of 2020, but a rise of just 1.54 million compared with Q1 2021. The previous two quarters had seen additions of 8.51 million and 3.98 million respectively.
The company’s APAC region represented about two-thirds of its global paid net adds in the second quarter and by contrast Q2 paid memberships in the US and Canada (UCAN) region were slightly down sequentially, down by 400,000 on a net basis. Netflix said that its large membership base in UCAN coupled with a seasonally smaller quarter for acquisition was the main reason for this dynamic. It added this was similar to what it experienced in Q2’19 when its UCAN paid net adds fell by 100,000. Since that time the company added nearly 7.5 million paid net adds in UCAN.
When it announced its Q1 results Netflix cautioned that while it anticipated a strong second half with the return of new seasons of some of its biggest hits and “an exciting” film line-up, there would be a lighter content slate in the first half of 2021, and hence slower membership growth. Overall it predicted paid net additions of 1 million for the second quarter of the year, compared with 10 million in the quarter a year ago as the effects of the pandemic were being felt.
The company says pandemic has created ongoing “unusual” choppiness and lumpiness in its growth and has distorted year-on-year comparisons as acquisition and engagement per member household spiked in the early months of Covid.
Going forward, for the third quarter of 2021, Netflix forecast paid net additions of 3.5 million, compared with 2.2 million in the prior year period. Netflix said that it achieved its forecast, it will have added more than 54 million paid net additions over the past 24 months or 27 million an annualised basis over that time period, consistent with its pre-Covid annual rate of net additions. The company was confident of hitting a 20% operating margin for the full year of 2021, compared with 18% in 2020.
As it attempts to address any worries on growth, Netflix announced in its Q2 results that it was in the early stages of further expanding into games, building on earlier efforts around interactivity for series such as Black Mirror Bandersnatch and Stranger Things. The company said that it regarded gaming as another new content category, similar to its expansion into original films, animation and unscripted TV. Going forward, Games will be included in members’ Netflix subscription at no additional cost similar to films and series with the games business initially primarily focused on mobile devices.
