Netflix added 1.54 million streaming subscribers in the second quarter, a slowdown from previous periods impacted by the coronavirus lockdowns but better than the 1 million net additions forecast by the company. For the third quarter, growth is expected to improve to around 3.5 million new customers, as more new content comes online. The company also confirmed it's expansion into gaming to help drive customer engagement and revenue growth.
The company ended the quarter with 209.18 million streaming customers in total, up 8.4 percent from a year earlier. Around two-thirds of the quarterly growth came from Asia, where the service still has room to grow, while customers in its biggest region, the US and Canada, fell by 0.4 million. Average revenue per membership was up 8 percent year-on-year, or 4 percent higher excluding currency effects.
Revenue growth also slowed slightly, with a 19.4 percent annual increase to USD 7.34 billion in Q2, in line with guidance. Operating profit rose to USD 1.85 billion from USD 1.36 billion a year ago, and the margin of 25.2 percent was well ahead of the company's full year forecast of 20 percent. Netflix's net profit nearly doubled year-on-year to USD 1.35 billion.
Free cash flow turned negative again, at USD 175 million, as production of new content ramped up again and the company spent USD 500 million on share buybacks. Netflix said it recently increased and extended its credit facility and still sees no need to pursue external financing for daily operations. The forecast for the full year remains free cash flow at around breakeven.
More new shows and games
Netflix said production was running well to launch a slate of new programmes in the second half. In the first half it spent around USD 8 billion on content and it expects this to reach USD 12 billion over the full year, a 12 percent increase on 2020.
The company also confirmed plans to move into gaming, which it sees as another genre to add to the content slate. Games will be included in the subscription at no extra cost and initially focus on mobile games. No timing for the games launch was given.
To further drive revenue growth, it has expanded the low-cost mobile-only Netflix subscription to 78 more countries in southeast Asia and sub-Saharan Africa. The five markets where it was already available showed that the plan was "roughly revenue neutral", as the lower price was offset by increased volume and better retention, Netflix said.
