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Netflix Subscriber Growth Slowed Dramatically in Q2 to Just 1.54 Million

Netflix
(Image credit: Netflix)

As expected, Netflix announced dramatically slowed global subscriber growth in the second quarter, with the leading streaming service adding only 1.54 million members to finish the three-month period with 209.18 million paid customers. 

The sign-ups number beat Netflix's own guidance of 1 million but missed analysts' consensus forecasts of around 1.9 million. 

In the quarantined second quarter of 2020, Netflix added more than 10 million paid memberships worldwide. 

Netflix said that the Asia-Pacific region accounted for about two-thirds of its subscriber growth in the most recent Q2. The streaming company actually lost around 400,000 customers in the United States and Canada over the three-month period. 

The slowed subscriber growth is in line with global Q2 expansion figures leaked earlier in July by Netflix's next closes rival, Disney, which also indicate a slowing post-pandemic (er, post-vax?) performance

The reality is, Netflix could see growth quarters like this for the next five years, and even Disney Plus--which has just over 100 million paid users--still might not catch up. 

Netflix is forecasting customer additions of 3.5 million for the third quarter, which would be a significant uptick over the 2.2 million added in Q3 2020. 

The Los Gatos, Calif.-based streaming giant also reported a 19% uptick in quarterly revenue to $7.3 billion. 

"COVID has created some lumpiness in our membership growth (higher growth in 2020, slower growth this year), which is working its way through," Netflix said in its letter to shareholders Tuesday. 

The company attributed the revenue increase to an 11% year-over-year growth in paid memberships worldwide, and a 4% increase in average revenue per member (ARM), driven by subscription streaming price increases, including one in the U.S. back in October. 

Netflix, meanwhile, highlighted its increasing operating margins, which it said will hit a target goal of 20% later this year. The company said that when it started its aggressive international expansion initiative back in 2016, operating margins only stood at around 4.3%. 

As it usually does, Netflix also gave shoutouts in its shareholders letter to strong-performing original programs. Notably, Shadow and Bone, an eight-episode series based on Leigh Bardugo‘s bestselling Grishaverse novels, and premiering at No. 1 on Netflix in the U.S. back in April, was seen by 55 million subscribers in its first 28 days on the platform. 

Netflix has renewed Shadow and Bone for a second season. 

The DC Comics adapted Sweet Tooth, which premiered in May, was at least sampled by 60 million members, the company added. 

Through the first half of 2021, Netflix said it has already spent $8 billion on content, an increasing amount the non-English language variety for the international market. 

"COVID and its variants make predicting the future hard, but with productions largely running smoothly so far, we're optimistic in our ability to deliver a strong second half slate."

More to come...