Netflix's profit soars as number of paid subscribers climbs

The company is introducing video gaming that will be included with membership subscriptions at no additional cost

Netflix, the world's largest streaming company, reported an 87.9 per cent year-on-year surge in second-quarter profit as the company added more than 1.5 million paid subscribers in three months, exceeding analysts’ expectations of one million.

Net income during the period reached $1.3 billion, nearly $633 million more than the same period last year. However, it was 20.7 per cent down on the quarterly basis.

The company saw a huge spike in the number of users last year as more people stayed indoors and moved to the online platform for home entertainment. Netflix posted a 19.4 per cent increase in revenue in the three months to June 30 from a year ago to $7.3bn.

We are excited as ever about our movies and TV series offering and we expect a long runway of increasing investment and growth across all of our existing content categories

Its operating income rose 36 per cent on the same period last year to $1.8bn.

“We finished the quarter with over 209 million paid memberships, slightly ahead of our forecast … we continue to focus on improving our service for our members and bringing them the best stories from around the world,” Netflix said in a statement to its stakeholders.

The company’s sales growth was driven by an 11 per cent increase in average paid streaming memberships and an 8 per cent growth in average revenue per membership, Netflix said.

It said the Covid-19 pandemic created an “unusual choppiness” in its growth and “distorted year-over-year comparisons” as acquisition and engagement per member household spiked in the early months of the crisis.

“In the second quarter, our engagement per member household was, as expected, down versus those unprecedented levels,” it said.

The pandemic-induced production delays last year led to a lighter first half in terms of new shows, but the company expects this to build through the course of the year.

Netflix spent $8bn on content in the first half of the year, up 41 per cent year-on-year. It expects the new seasons of some of its biggest shows and a new movie line-up to deliver a strong second half.

“Covid and its variants make predicting the future hard, but with productions largely running smoothly so far, we are optimistic in our ability to deliver a strong second half slate,” Netflix said.

The company confirmed it was pushing into the gaming industry. It said games will be included with member subscriptions at no additional cost, similar to films and series. The company will primarily focus on games for mobile devices.

“We are excited as ever about our movies and TV series offering and we expect a long runway of increasing investment and growth across all of our existing content categories … but since we are nearly a decade into our push into original programming, we think the time is right to learn more about how our members value games,” Netflix said.

In its guidance for the third quarter, Netflix predicted paid net additions of 3.5 million subscribers against 2.2 million added in the prior year period.

Competitors such as Walt Disney and Amazon are spending billions to compete with Netflix.

“We are still very much in the early days of the transition from linear to on-demand consumption of entertainment,” Netflix said.

“The planned merger of Warner Media Group and Discovery and Amazon’s pending acquisition of MGM are examples of the ongoing industry consolidation as firms adapt to a world where streaming supplants linear TV,” it added.

Updated: July 29th 2021, 5:49 PM