Netflix to add mobile video games as subscriber growth slows

July 20 (Reuters) – Netflix Inc (NFLX.O) has said it will dive deeper into video games as the movie and TV streaming service forecasts weak subscriber growth amid competition growing and lifting of the pandemic restrictions that had kept people at home.

The company’s shares hovered around $ 531.10 on Tuesday after hours.

Netflix is ​​experiencing a sharp slowdown in new customer numbers after a boom in 2020 fueled by stay-at-home orders to curb the COVID-19 pandemic. In the United States and Canada, Netflix said it lost about 430,000 subscribers in the second quarter, only its third quarterly decline in 10 years.

The streaming video pioneer said it was in the early stages of expanding its video game offering, which would be available to subscribers at no additional cost. The company will initially focus primarily on mobile games.

“We see games as another new category of content for us, similar to our expansion into original films, animation and unscripted television,” the company said in its quarterly letter to shareholders.

The multi-year effort will start “relatively small” with games tied to Netflix’s successes, said Greg Peters, COO and chief product officer, in a post-benefit video interview.

“We know the fans of these stories want to take it further. They want to engage more,” said Peters.

Netflix has embarked on video games with a few titles linked to series like “Stranger Things” and “The Dark Crystal: Age of Resistance”.

Some analysts have said the company that dominates streaming video must find new ways to jumpstart subscriptions after years of rapid expansion. According to eMarketer, Netflix’s share of US subscription streaming video revenue will grow to 30.8% by the end of 2021, from nearly 50% in 2018.

“Netflix delivered another disappointing quarter as competition in the streaming space intensifies,” said Jesse Cohen, senior analyst at Investing.com. “The lack of any new impending growth catalyst has been a major reason for Netflix’s relatively subdued performance this year.”

Small toy figures can be seen in front of the Netflix logo displayed in this illustration taken March 19, 2020. REUTERS / Dado Ruvic / Illustration / File Photo

Co-CEO Reed Hastings said games and other businesses such as podcasts and merchandise sales will be “supporting elements” to help attract and retain customers in its core video streaming business.

The company predicted it would add 3.5 million customers from July through September. Wall Street was counting on a forecast of 5.5 million, according to analysts polled by Refinitiv.

For the quarter just ended, Netflix added 1.54 million customers, beating analysts’ forecast of 1.04 million. The total number of subscribers stood at 209 million at the end of June.

A year ago, Netflix saw 10.1 million subscribers in the second quarter.

This year, Netflix felt the impact of COVID-19 on TV production, which left the company with a small menu of new titles. At the same time, Disney + from Walt Disney Co (DIS.N), HBO Max from AT&T Inc (TN) and other services have attracted customers, and summer blockbusters have returned to theaters. Read more

The easing of security measures in the event of a pandemic has also drawn people out of their homes and away from their televisions.

Earnings from April to June were $ 2.97 per share, below the average forecast of $ 3.16.

Netflix promises more dense programming in the second half of 2021, including new seasons of “You”, “Money Heist” and “The Witcher”.

If its subscriber forecast comes true, Netflix will have added more than 54 million subscribers in the past two years, a pace consistent with its annual additions before the COVID-19 pandemic, the company said.

He also noted that streaming TV still accounts for a small portion of overall viewing time and its service is less mature outside of the United States.

“It’s still a huge prize and we’re still in the best position to chase after,” said co-CEO Ted Sarandos.

Reporting by Eva Mathews and Akanksha Rana in Bengaluru and Lisa Richwine in Los Angeles; Editing by Shounak Dasgupta and Lisa Shumaker

Our standards: Thomson Reuters Trust Principles.

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