Netflix U.S. subscriptions miss the mark

The SVOD's Q3 report shows a subscriber slowdown in its key American market, while it exceeded new-member targets globally.
October 15, 2015

Netflix executives maintain they are still on track for global domination in 2016 despite disappointing Q3 results that saw the SVOD fall short on its anticipated new subscriber additions in its chief market.

In a report to shareholders released Oct. 14, Reed Hastings, CEO, and David Wells, CFO, said the company’s new-member forecast for the U.S. proved too high. Netflix added 880,000 new subscribers in the quarter (for a total of 43.18 million), missing the target of 1.15 million.

In all, Netflix expects to finish the year at about 44.83 million subscribers, up only slightly from 39.11 million at the end of 2014.

The cause? A “slightly higher-than-expected involuntary churn” (inability to collect fees), which the company blames on its ongoing transition to chip-based credit and debit cards, according to the earnings’ report.

Analysts, meanwhile, pointed to increased competition in the U.S. from the likes of Hulu, Amazon Video and HBO for contributing to the slowdown in Netflix overall state-side subscriber growth.

In a televised interview with Bloomberg, Paolo Pescatore, director of multiplay and media at CCS Insight, said it’s easy to see why the competition is heating up, noting that while Netflix’s quarterly results may be down, it’s total subscriber figures still show a sizable opportunity for other SVODs looking to cash in on viewers’ increased appetite for on-demand content.

“To have a significant subscriber base and all of these people spending money, it’s quite significant,” he said.

Netflix, too, references its American competition in the report, calling the current landscape “vibrant” as SVODs, big and small, “remain active bidders for content, in addition to all the cable networks around the world.”

The bright spot in the report was found in the company’s international growth. Outside the U.S., global net subscriber additions totaled 2.74 million, compared to 2.04 million in the prior year, and well above the 2.40 million Q3 forecast. On the heels of its latest launch in Japan, Netflix has nearly 26 million members internationally. The company expects to end 2015 at 29.5 million following its roll out later this month in Spain, Italy and Portugal.

In 2016, Netflix has plans to expand into South Korea, Hong Kong, Taiwan and Singapore — a move that is expected to contribute to continued revenue drains.

“Our plan remains to run around break-even through 2016 and to deliver material profits thereafter,” the report states.

Pescatore, for one, believes the company is on the right track, telling Bloomberg: “The future for the company lies in international expansion.”

Earlier in October, Netflix announced it will increase prices in several countries. In the U.S., the $7.99 fee for its standard one-screen-at-a-time plan remains unchanged, however the high-def (two-screen) plan rose by $1 a month to $9.99.






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