By Micah Maidenberg and Joe Flint
Netflix Inc. said subscriber growth slowed in the third quarter, highlighting the fresh challenges the company faces from competitors ramping up their own streaming services as the coronavirus pandemic continues to disrupt the entertainment industry.
Netflix on Tuesday reported that it added 2.2 million subscribers in the quarter on a net basis, short of its forecast in July of 2.5 million new subscriptions for the period. The most recent gain is smaller than those Netflix reported for the first and second quarters, when it added 15.8 million and 10.1 million subscribers, respectively.
The streaming giant's ability to reel in subscribers during the first half of the year marked it as one of the companies that benefited from the pandemic. Consumers moved to purchase Netflix subscriptions as Covid-19 initially spread and officials locked down economies, resulting in millions of people spending more time at home. The suspension of professional sports leagues, cancellation of events like concerts and closure of movie theaters earlier this year reduced competition.
Executives at the Los Gatos, Calif.-based company previously warned that growth had been pulled forward amid the pandemic and said they expected subscription increases to lessen during the second half of 2020. Meanwhile, sports have resumed, more people have been traveling and cinemas have reopened.
"As we expected, growth has slowed," the company said in a letter to shareholders.
Netflix shares fell 5.4% in after-hours trading.
The company faces heightened competition from other media companies that have also started streaming television shows, movies and other content. Earlier this month, Walt Disney Co. said it would reorganize operations to focus on streaming initiatives, which include Disney+. AT&T Inc.'s WarnerMedia is in the midst of a similar restructuring to focus on the new HBO Max streaming platform and Comcast Corp.'s NBCUniversal is realigning its entertainment operations to give priority to its new Peacock streaming service.
Netflix is in the midst of setting up a new leadership team on its television content side. Cindy Holland, the original programming executive who played a key role in developing many of the streamer's most successful shows including "Orange is the New Black" and "Stranger Things," left last month after Bela Bajaria, who oversaw international and unscripted programming was promoted to head of global television.
Similar to previous quarters, Netflix reported stronger gains in many markets overseas than in the U.S. and Canada. For the latest quarter, it said it added one million subscribers in Asia, 760,000 in the region including Europe and the Middle East and 260,000 in Latin America.
In North America, the company gained 180,000 additional subscribers for the third quarter, down compared with the gain of more than 2.9 million in the second quarter.
Netflix ended the quarter with more than 195 million subscriptions world-wide.
The company reported revenue of $6.44 billion, up from $5.25 billion a year earlier. Analysts expected Netflix to generate $6.39 billion in revenue for the latest quarter.
Profit rose to $790 million, or $1.74 a share, from $665 million, or $1.47 a share, the year earlier. Analysts had expected $2.13 a share, according to FactSet.
Write to Micah Maidenberg at firstname.lastname@example.org and Joe Flint at email@example.com
Corrections & Amplifications
This item was corrected at 5:50 p.m. ET to show that in North America, the company gained 180,000 additional subscribers for the third quarter. An earlier version misstated the figure as 180,00.
(END) Dow Jones Newswires