Netflix to add mobile video games as subscriber growth slows

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By Lisa Richwine and Akanksha Rana

NETFLIX said it would make a deeper dive into video games as the movie and TV streaming service projected weak subscriber growth amid growing competition and the lifting of pandemic restrictions that had kept people at home.

The company’s shares hovered about even at $531.10 (about R8 000) in after-hours trading on Tuesday.

Netflix is weathering a sharp slowdown in new customers after a boom last year fuelled by stay-at-home orders to curb the Covid-19 pandemic. In the US and Canada, Netflix reported losing about 430 000 subscribers in the second quarter, only its third quarterly decline in 10 years.

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

“We view gaming as another new content category for us, similar to our expansion into original films, animation and unscripted TV,” its said in its quarterly letter to shareholders.

The multiyear effort will start “relatively small” with games tied to Netflix hits, chief operating officer and chief product officer Greg Peters said in a post-earnings video interview.

“We know that fans of those stories want to go deeper. They want to engage further,” Peters said.

Netflix has dabbled in video games with a few titles linked to series, among them Stranger Things and The Dark Crystal: Age of Resistance.

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

“Netflix delivered another underwhelming quarter as competition in the streaming space heats up,” said Investing.com senior analyst Jesse Cohen. “The absence of any new looming growth catalysts has been one of the main reasons for Netflix’s relatively mild performance this year.”

Co-chief executive Reed Hastings said gaming and other ventures, such as podcasts and merchandise sales, would be “supporting elements” to help attract and retain customers to its core business of streaming video.

The company projected it would add 3.5 million customers from this month through to September. Wall Street had expected a forecast of 5.5 million, according to analysts surveyed by Refinitiv.

For the just-ended quarter, Netflix added 1.54 million customers, beating analyst projections of 1.04 million. Total subscribers numbered 209 million at the end of last month.

A year ago, Netflix picked up 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, Walt Disney Co’s Disney+, AT&T Inc’s HBO Max and other services attracted customers, and summer blockbusters returned to movie theatres.

The easing of pandemic safety measures also lured people out of their homes and away from their televisions.

Earnings for April through to last month came in at $2.97 per share, below the average forecast of $3.16.

Netflix promises a heavier line-up in the second half of the year, including new seasons of You, Money Heist and The Witcher.

If its subscriber forecast pans out, Netflix would have added more than 54 million subscribers over the past two years, a pace consistent with its annual additions before the Covid-19 pandemic, the company said.

It also noted that streaming television accounted for a small portion of overall viewing time and that its service was less mature outside the US.

“It’s still an enormous prize and we are still in the best position to run after it,” co-chief executive Ted Sarandos said.

REUTERS

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