Netflix US growth slows as international ambition climbs
James R | On 15, Oct 2015
Netflix has shrugged off slow growth in the US, as the company increasingly focuses on its international plans.
The streaming site added 3.62 million new subscribers during the third quarter of 2015, taking its worldwide total to 69.17 million members.
But growth on home soil slumped in the three months to September 2015: only 0.88 million new Americans signed up, down from the 0.98 million recorded in the same period last year and, crucially, below the company’s forecast of 1.15 million. Share prices fell in response to the news last night. Indeed, the dip arrives on the back of two big blows for the VOD giant: this summer, it chose not to renew a deal with US distributor Epix, a decision that saw big-hitting titles such as Transformers and The Hunger Games go to rival Hulu, and the company has since announced a price increase for US members.
More money for less content? It’s a gamble the company is taking, just as the streaming market becomes more competitive. In a letter to shareholders, though, CEO Reed Hastings and CFO David Wells shrugged off the poor performance, attributing it to “the ongoing transition to chip-based credit and debit cards” in America. But Netflix is increasingly thinking on a global scale: with launches in Japan, Portugal and Spain, it needs to fund not only content acquisition at home but overseas as well. Indeed, the company’s operating income was $74 million this quarter, compared to $110 million last year.
Internationally, meanwhile, Netflix is expanding faster than expected, thanks to its new European markets: it added 2.47 million new members outside of the US, ahead of its 2.4 million forecast. With its eye on a 2016 launch in South Korea, Hong Kong, Taiwan and Singapore, Netflix will take some comfort in the fact that its recent price hike of 1 euro for the continent has not “negatively impacted growth”.
“Our plan remains to run around break-even through 2016 and to deliver material profits thereafter,” says the company.
Its content line-up has become increasingly international too: Narcos has enjoyed “substantial viewing”, says Netflix, while it has also begun production on its second Mexican original series, Ingobernable. Netflix says it welcomes the competition from other rivals, adding that even with Hulu and Amazon snapping up exclusive deals, the site still has “a lot of content to select from”.
As for its US slowdown? Netflix says it has seen “no material reduction in US feature film viewing”, suggesting that its focus on original content – which can be released globally without extra costs – may well be a gamble that pays off.