Netflix misses targets on international subs

Netflix has reported that it only added 1.5 million subscribers outside the US in the second quarter of 2016, instead of the two million it had predicted.

The streaming giant also reported lower than expected numbers for the US – 160,000 rather than 500,000 – the lowest quarterly gain in five years. Netflix shares plunged 15% in after-hours trading on Monday (July 18) following the announcement.

Netflix CEO Reed Hastings blamed recent media reports of the company’s price hikes, which he says encouraged people to cancel their subscriptions before the increase took effect. “Churn ticked up slightly and unexpectedly, coincident with the press coverage in early April,” Hastings said.

In a letter to shareholders, the company said: “We are growing, but not as fast as we would like or have been. Disrupting a big market can be bumpy, but the opportunity ahead is as big as ever and we continue to improve every aspect of our business.”

Hastings added that Netflix is not losing subscribers to competing services. Indeed recent research suggests that Amazon and Hulu subscriptions are usually used in conjunction with Netflix (see report here).

Netflix has 83 million subscribers worldwide and is currently available everywhere in the world except China, North Korea, Crimea and Syria.

No specific reasons were given for lower than expected take-up in international territories, but the streaming giant said it would work harder to localise the service, starting with Poland and Turkey in the third quarter. The company is also ramping up local-language production – especially in Brazil, Germany, Italy, Japan, Korea and India.

Although Netflix doesn’t break out numbers for individual territories, India is thought to be a challenging territory for the company due to strong local competition, piracy and its price point, which is relatively high for Indian consumers. Although local press has described Netflix as the best service for watching foreign TV shows, it still doesn’t have the same depth of Hindi and regional-language content as local players such as Hotstar, Spuul and ErosNow.

However, in Southeast Asia, Media Business Asia recently released a survey suggesting that Netflix is enjoying higher conversion rates than regional and local rivals (see report here).

China is not likely to be added to the mix any time soon as the regulatory environment has become even more challenging in recent months. In April, Chinese authorities shut down Apple’s book and movie services, along with Disney’s online partnership with Alibaba.