Netflix lost 433,000 subscribers in the United States and Canada in the second quarter of 2021. It is the second time Netflix has reported a loss of subscribers in North America, although it has 73.95 million paying subscribers there. Subscriber growth is showing signs of slowing generally, as Netflix approaches 210 million subscribers worldwide. Netflix is planning to add games to its offering, as another way of attracting and retaining subscribers.
Quarterly revenue of $7.34 billion was up 19% on the same period the previous year, while operating income rose 36% to $1.85 billion.
Spending on technology and development exceeded $2 billion over 12 months, with another $2.4 billion spent on marketing.
Netflix ended the first half of 2021 with 73.95 million subscribers in the United States and Canada, which was only slightly more than they had at the end of 2020.
The quarterly fall echoes the second quarter of 2019, when Netflix lost 132,000 subscribers, although since then it has gained 7.45 million.
In Europe, Netflix gained just 188,000 subscribers, compared to 1.81 million the previous quarter and an average of 3.73 million a quarter in 2020.
However, Netflix gained over a million subscribers in the Asia Pacific region and three-quarters of a million in Latin America.
Overall, Netflix has 209.18 million paid memberships worldwide, a gain of 1.54 million, which was slightly above its own modest forecast of 1.0 million.
What is clear is that after substantial subscriber gains in 2020, overall subscriber growth has slowed.
Netflix cited Nielsen research, which shows that Netflix accounts for 7% of total television time in the United States, suggesting that left room for growth.
Reed Hasting, the co-founder and co-chief executive of Netflix, told analysts he expects streaming to continue to grow, “until, say, streaming is 50%, 60%, 70% of viewing, and then there’s going to be shakeout, and we want to be prepared and leading that”.
Spencer Neumann, the chief financial officer, said that there are 800 to 900 million broadband or pay television households around the world outside China. “We don’t see why we can’t be in all or most of those homes over time if we’re doing our job.”
Netflix is moving into games to extend its core entertainment offering, building on its interactive Black Mirror and Bandersnatch experiments and its Stranger Things games.
The company says it sees this as a new content category, like its expansion into original films, animation and unscripted shows. Games will be included in its subscription at no additional cost.
Gregory Peters, the chief operating officer and chief product officer explained: “what’s great about interactive is, first of all, you can provide universes that just provide really significant amount of time that people can engage in and explore.”
“We also feel that our subscription model yields some opportunities to focus on a set of game experiences that are currently underserved by the sort of dominant monetization models and games.”
Mobile phones will be the primary focus, “but ultimately, we see all of the devices that we currently serve as candidates for some kind of game experience”, he said. “We’ve actually been delivering lighter-weight interactive experiences on TVs and TV connected devices for some time. And you can call those games, you can call them interactive experiences, but obviously, they all exist on a spectrum.”
“There is a big, big prize here,” he said. “We’re really thinking about this as a core part of our subscription offering.”
Asked about whether Netflix was likely to invest more in sports coverage, Ted Sarandos, the chief content officer, said: “Our fundamental product is on demand and advertising free, and sports tends to be live and packed with advertising. So, there’s not a lot of natural synergies in that way, except for it happens in television.”