Netflix Q3 subscriber view misses Wall Street expectations, says will add video games

Netflix cited "choppiness" in video subscriber trends caused by the pandemic. The company confirmed it will add video games to its service.
Written by Tiernan Ray, Senior Contributing Writer

Streaming entertainment giant Netflix this afternoon reported Q2 revenue that topped expectations, but missed on the bottom line, and offered an outlook for revenue in line with Wall Street's consensus.

In the all important metrics department, Netflix added 1.54 million paying subscribers, on a net basis, topping expectations for 1.15 million. However, the company expects to add just 3.5 million paying subscribers this quarter, which is well below consensus for 5.63 million.

The report sent Netflix shares down about 3% in late trading. 

Netflix said it will add video games to its service, confirming recent rumors.

Netflix cited "choppiness" in subscriber additions caused by the pandemic:

The pandemic has created unusual choppiness in our growth and distorts year-over-year comparisons as acquisition and engagement per member household spiked in the early months of COVID. In Q2'21, our engagement per member household was, as expected, down vs. those unprecedented levels but was still up 17% compared with a more comparable Q2'19. Similarly, retention continues to be strong and better than pre-COVID Q2'19 levels, even as average revenue per membership has grown 8% over this two-year period, demonstrating how much our members value Netflix and that as we improve our service we can charge a bit more. 

The report follows a report in April in which Netflix had missed its own target for net subscriber additions. 

Revenue in the three months ended in June rose to $7.34 billion, yielding a net profit of $2.97 a share.

Analysts had been modeling $7.32 billion and $3.18 per share.

For the current quarter, the company sees revenue of $7.48 billion, and EPS of $2.55 per share. That compares to consensus for $7.48 billion and $2.18 per share.

Regarding the video game business, Netflix said,

We're also in the early stages of further expanding into games, building on our earlier efforts around interactivity (eg, Black Mirror Bandersnatch) and our Stranger Things games. We view gaming as another new content category for us, similar to our expansion into original films, animation and unscripted TV. Games will be included in members' Netflix subscription at no additional cost similar to films and series. Initially, we'll be primarily focused on games for mobile devices. We're excited as ever about our movies and TV series offering and we expect a long runway of increasing investment and growth across all of our existing content categories, but since we are nearly a decade into our push into original programming, we think the time is right to learn more about how our members value games."

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