Here’s a taste of what life is going to be like for Spotify in the quarters and years ahead: Netflix’s share price took a tumble last night after the video-streaming service missed its own forecast for subscriber growth. At least the company didn’t dodge the bad news. “We had a strong but not stellar Q2, ending with 130 million memberships. Membership growth was 5.2m, the same as Q2 last year, but lower than our 6.2m forecast,” explained Netflix in its quarterly letter to shareholders – albeit while noting that its financial metrics did meet its forecasts.
Those metrics? Netflix’s quarterly revenue grew by 40.3% year-on-year to $3.91bn – once its still-going DVD-rental business is stripped out, the growth for streaming was 42.8% to $3.81bn. Netflix also reported a quarterly profit of $384m, up from $66m a year ago – this kind of growth is certainly something Spotify would like to see in its future. Of the 130.1m memberships (subscriptions) at the end of Q2, 124.4m were paying, while the rest were trials.
There’s a lot of good news here, but the share price still fell. Netflix executives explained the subscribers issue as one of inaccurate forecasting rather than business problems. “After four consequent quarters of under-forecasting the business we over-forecasted the business,” as chief financial officer David Wells told analysts. “Our total addressable market is intact and hasn’t really changed based on those 90 days of actual.” CEO Reed Hastings added that “the fundamentals have never been stronger” for Netflix.
During that analyst call, the executives were asked about their appetite for expansion into other content areas, with the interviewer citing sports, news “or for other expansions of your platform to either get into audio or gaming”. Content boss Ted Sarandos swatted away the question. “No change in our long-term views that have been, as you refer to, expressed over and over,” he said. “We have such an opportunity in movies and TV shows of many types around the world that it’s consuming every bit of energy and excitement that we have.” Hold those ‘Netflix Music’ rumours for now, then.
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