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Netflix's first domestic subscriber loss in 8 years; misses international addition estimate

The company is to launch a lower-priced plan in India

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MUMBAI: The streaming giant Netflix witnessed domestic subscriber loss for the first time in the last eight years since it separated its DVD mail-order system and streaming platform. In the second quarter (Q2) of 2019, Netflix also added nearly 2 million fewer international customers than expected.

In contrast to the projected 5 million addition in international subscribers, Netflix only gained 2.7 million subscribers. On the other hand, the company also lost more than 100,000 subscribers in the US. The company in its letter to shareholders said that Q2’s content slate drove less growth in paid net adds than it anticipated. Netflix added that the missed forecast was more noticed in the regions where prices were hiked. However, the company also denied any impact of the increased competition on the Q2 results.

“Additionally, Q1, there may have been more pull-forward effect than we realised. In prior quarters with over-forecasts, we’ve found that the underlying long-term growth was not affected and staying focused on the fundamentals of our business served us well,” the company said in a letter to its shareholders.

The streaming platform has started the third quarter with a returning season of its hit show Stranger Things while the final season of another iconic show Orange is the New Black will be released in the quarter. The company expects the subscriber growth to return to more typical growth in Q3, and said it is seeing that in these early weeks of Q3. It also forecast Q3 global paid net adds of 7 million with 0.8 million in the US and 6.2 million internationally.

However, Netflix posted revenue of $4.92 billion, in-line with Wall Street’s $4.93 billion estimate, and earnings of 60 cents per share beating analyst consensus estimates of EPS 56 cents. “Much of our domestic, and eventually global, Disney catalog, as well as Friends, The Office, and some other licensed content will wind down over the coming years, freeing up budget for more original content,” the company added.

The company also highlighted building out its licensing and brand partnerships effort, which is optimising for fan and viewer engagement over revenue maximisation. It also noted during the launch of Stranger Things season 3, the platform partnered with best-in-class brands like Coke, Nike, Burger King, and Baskin Robbins to build deep connections with the fans.

More importantly, it announced a very important move in its important international market India in front of the product initiative. “After several months of testing, we’ve decided to roll out a lower-priced mobile-screen plan in India to complement our existing plans. We believe this plan, which will launch in Q3, will be an effective way to introduce a larger number of people in India to Netflix and to further expand our business in a market where Pay TV ARPU is low (below $5). We will continue to learn more after launch of this plan,” the company said.

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