21 July 2021

Netflix subscriber growth slows as worldwide lockdowns ease

21 July 2021

Netflix reported its worst slowdown in subscriber growth in eight years as people emerged from worldwide lockdowns.

The video service added 1.5 million subscribers during the April-June period, slightly better than the modest increase that management forecast after the service stumbled to a sluggish start during the winter months, but still far below its growth rate in recent years.

Netflix’s net gain of 5.5 million subscribers through the first six months of this year represents its weakest first-half performance since 2013 – a time when the company was still rolling out more original programming as it branched out from licensing existing TV series and movies.

Now Netflix is taking another leap by offering video games which it intends to produce itself as part of what the company described as a multi-year expansion.

There's a a big, big prize here, and our job is to be really focused

The California-based company telegraphed the move last week when it disclosed the hiring of a veteran video game executive, Mike Verdu, to explore potential opportunities in another field of entertainment.

“The reason we’re doing them is to help the subscription service grow and be more important in people’s lives,” Netflix co-CEO Reed Hastings told investors during a Tuesday discussion.

Greg Peters, Netflix’s chief product officer, said the company will initially focus on mobile games before eventually expanding to consoles and TV sets as well.

The games initially will be tied to Netflix’s most popular programming, Mr Peters said, but standalone titles may be added to the mix too. He even speculated that Netflix eventually may create a TV series or film inspired by one of its video games.

“There’s a a big, big prize here, and our job is to be really focused,” Mr Peters said.

Despite this year’s growth slowdown, Netflix remains by far the world’s biggest streaming service in an increasingly competitive field that includes Walt Disney, HBO, Amazon and Apple. Netflix finished June with 209 million worldwide subscribers.

Netflix’s heft also has produced steady profits.

The company earned 1.35 billion dollars (nearly £1 billion), nearly doubling from the same time last year. Revenue rose by 19% from last year to 7.3 billion dollars (£5.36 billion).

But the lacklustre first-half numbers are a dramatic reversal from last year, when government-imposed lockdowns across the world thrust people into binge-watching frenzies while kept at home.

Already the world’s largest video streaming service when the pandemic began in March 2020, Netflix picked up 26 million subscribers during the first half of last year.

While no-one expected Netflix to sustain that breakneck pace, the drop off in subscriber growth this year has been more severe than anticipated.

Netflix shares have fallen by about 10% from their peak of 593.29 dollars (£435.82) six months ago. The shares edged up slightly in extended trading after Tuesday’s news came out.

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