Netflix Reveals Subscriber Loss in the US

As part of their second quarter investor letter Netflix has revealed their gains and losses in terms of subscribers for the time from April 1 to June 30. Though the streamer was able to gain 1.5 million paid subscribers worldwide in the quarter, they actually lost subscribers in the United States and Canada. In the domestic market Netflix was able to gain 450k subscribers in the US in Q1 of 2021 but in Q2 they lost almost all of them, posting -430k subscribers for the region. This marks the first time that Netlfix has had negative net-subscriber growth in the US in two years (Q2 2019 was the last time).

In their letter, they write: "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....We added 1.5m paid memberships in Q2, slightly ahead of our 1.0m guidance forecast...As expected, Q2 paid memberships in the UCAN region were slightly down sequentially (-0.4m paid net adds). We believe our large membership base in UCAN coupled with a seasonally smaller quarter for acquisition is the main reason for this dynamic. This is similar to what we experienced in Q2'19 when our UCAN paid net adds were -0.1m; since then we've added nearly 7.5m paid net adds in UCAN."

Netflix did go on to reveal how they intend to lure subscribers back and it's not in the film/TV programming arena, it's in video games. The streamer says that they see moving into gaming in the same way as when they began to expand their original programming. They note that for the time being whatever they release in terms of games will be included in Netflix subscriptions "at no additional cost similar to films and series" with initial focus being on mobile games. This line comes in their shareholder letter just a few pages after Netflix added this:

"Our belief is that as we steadily improve our service to better please our members, this will lead to continued growth in our membership base, ARM, revenue, operating margin and profit dollars."

So while no additional cost for gaming will be added to subscription costs at the time, there's no guarantee that subscription costs won't rise in the very near future.

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