2nd Quarter Subscribers 1.54 Million
Sharp Decline Compared to Last Year's 10.1 Million
"Subscribers Lost to Disney Plus"
[Asia Economy Reporter Yujin Cho] The number of new subscribers to Netflix, the world's No. 1 online video service (OTT) provider, dropped to one-tenth of the level from a year ago in the second quarter of this year. Last year, subscriber numbers surged explosively due to the impact of COVID-19, but as economic reopening led to more outdoor activities this year, demand has significantly decreased again. New entrants have continued to enter the market to capture the suddenly expanded market, leading to excessive competition, and the outlook for the second half of the year is not bright. Netflix plans to take another leap forward through game content.
◇ 430,000 Decrease in the US and Canada = On the 20th (local time), Netflix announced in a letter to shareholders that the number of new subscribers in the second quarter of this year was 1.54 million. This figure exceeded Wall Street's expected figure of 1 million, compiled by financial information firm Refinitiv, but it was only 15% of the same period last year (10.1 million). Netflix's total number of subscribers reached 290 million, but it lost 430,000 subscribers in its largest market, the United States and Canada.
Performance was also lackluster. Earnings per share in the second quarter were $2.97, falling short of Wall Street's estimate of $3.14. Revenue for the same period was $7.34 billion, slightly exceeding the expected $7.32 billion. Due to the weak performance, Netflix's stock price fell 4% in after-hours trading before slightly rebounding. Netflix evaluated that "the delay in content production caused by the COVID-19 pandemic last year postponed the release of new content scheduled for the first half of this year, which affected the performance."
The company is optimistic that the subscriber growth trend will accelerate again in the third quarter, breaking this pattern. It expects subscriber growth to recover as delayed follow-up seasons and new content will be newly introduced in the third and fourth quarters. Netflix stated that it spent more than $8 billion in cash on content investment in the first half of this year. According to FactSet, 3.5 million new subscribers are expected to be added in the third quarter, but this is lower than investors' forecast of 5.5 million.
◇ Losing Subscribers to Disney Plus... Breakthrough Through Games = Foreign media analyzed that the end of the COVID-19 boom and intensified competition among OTT providers have shaken the market landscape, affecting the sharp decline in subscriber numbers.
The New York Times (NYT), citing research from content analytics firm Parrot Analytics, reported that OTT subscribers are moving from Netflix to Disney Plus. It is analyzed that latecomers armed with mergers and acquisitions (M&A) and independent studio operations are rapidly expanding their presence based on original content, causing Netflix, which has maintained a dominant market share for over 10 years, to lose its dominance.
Parrot Analytics said in a press release before Netflix's earnings announcement that "a lack of original blockbusters and intensified competition in the OTT market are negatively impacting Netflix's subscriber growth and retention." According to global market research firm Ampere Analysis, Netflix's market share shrank significantly from 29% in 2019 to 20% last year.
Netflix is expanding into new businesses such as mobile games and consumer goods as a breakthrough to overcome growth stagnation. To this end, Netflix hired Mike Verdu, formerly of Electronic Arts (EA) and Facebook, as vice president of game development.
Reed Hastings, CEO of Netflix, said, "We will not rely on revenue from games or consumer goods," adding, "We plan to continue focusing on improving OTT services such as content investment."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
