LOS GATOS, Calif. – Netflix’s second quarter saw paid membership grow by 2.7 million subscribers, which was far less than the 5.5 million growth in subscribers Q2 2018, and well off the company’s 5 million forecast for the quarter ended June 30th.
The company actually lost 130,000 customers in the U.S., where it had expected to add more than 350,000.
Despite that, the company said Wednesday evening when it announced its results after the markets closed, it expects 7 million paid memberships in Q3, more than the 6.1 million in the same quarter a year ago, driven by people coming on board for the latest season of Stranger Things, for example, as well as other new content.
Excluding the year over year foreign exchange (F/X) impact on revenue, global streaming ARPU grew 9%, with 12% and 7% ARPU growth in the US and international segments, respectively, reads the press release.
When it comes to the miss in its forecast, the company’s release said: “We strive for accuracy (not conservatism), which means that in some quarters we will be high and other quarters low relative to our guidance. In Q2’19, our membership growth forecast was high.
“Our missed forecast was across all regions, but slightly more so in regions with price increases. We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2, and competitive intensity and our penetration is varied across regions (while our over-forecast was in every region).”
The company also placed the blame on its content slate in the quarter, too. “We think Q2’s content slate drove less growth in paid net adds than we anticipated. Additionally, Q1 was so large for us (9.6m net adds), there may have been more pull-forward effect than we realized. 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,” reads the release.
When it comes to future growth, the company is looking to India – but on smaller screens, and with a lower price. “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),” reads the release.
The company also insisted that despite regular rumours, advertising is not on the way to Netflix. Being ad-free “remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false. We believe we will have a more valuable business in the long term by staying out of competing for ad revenue and instead entirely focusing on competing for viewer satisfaction,” reads its release.
