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 projected it would add 3.5 million customers from July through September. Wall Street had expected a forecast of 5.5 million, according to analysts surveyed by Refinitiv.
Still, Netflix reached a base of 209 million subscribers, at the end of June. However, earnings for April through June came in at $2.97 per share, below the average forecast of $3.16.
Because of that, Netflix said it is 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.
The multi-year effort will start “relatively small” with games tied to Netflix hits, COO and CPO 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.
At first, the company intends to invest in games linked to successful series, such as “Stranger Things” and “The Dark Crystal: Age of Resistance“.
Competition in the streaming heats up
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 U.S. revenue from subscription streaming video will shrink to 30.8% by the end of 2021, from nearly 50% in 2018.
In Brazil, data from JustWatch on the performance of streaming platforms in the second quarter of this year show that Netflix remains ahead, taking 31% of the Brazilian streaming audience. The second biggest player, Prime Video, from Amazon, takes 24% of the market.
But competition has been fierce: Disney plus, which debuted in Brazil just over six months ago, has already reached half the size of Prime Video and continues to grow. In addition, HBO Max has just debuted and is expected to further impact this audience share split.
“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.”
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, other services attracted customers and summer blockbusters returned to movie theaters. Netflix promises a heavier lineup in the second half of 2021, including new seasons of “You,” “Money Heist” and “The Witcher.”