When it reports its second-quarter results on Tuesday, the company has previously forecasted that it will add just 1mln new subscribers in the period, the lowest number in a decade, in a further deceleration in the growth of its user base after seeing a massive boom last year as the pandemic confined customers to their houses and sent demand for streaming services soaring.
This follows a similar slowdown in the first quarter of the year, when Netflix reported 3.98mln people signed up to the platform, well below forecasts of 6mln.
A forward pull rate of new subscribers (i.e. people signing up earlier during the pandemic) is one of the possible reasons behind the anaemic growth rate so far this year, while some analysts have also pointed out that the re-opening of cinema’s in the firm’s core European and North American markets could also dent momentum as its captive market is released.
“The figures may surprise on the upside, but with other entertainment avenues opening up once more, it’s going to be increasingly tough to keep all eyes on the screen”, said analyst Susannah Streeter at Hargreaves Lansdown.
Over-55s could provide saving grace
One key problem behind Netflix’s slowdown is that its dominant position among 18-34 years olds, often seen as the most tech-savvy demographic, has left it with little more to wring out of the age group, leaving it instead searching for new markets. A similar trend is occurring geographically, with the firm’s growth rate in North America and Europe beginning to stagnate.
With this in mind, the company may spy an opportunity among 55-64 years olds, an age group with the lowest penetration rate with around 50% of internet-connected people in this demographic having a Netflix subscription compared to 80% for 18-34, 70% for 35-44 and 62% for 45-54, according to a Guardian report.
With this in mind, Netflix could see its content strategy shift more toward genres favoured by older watchers, notably documentaries and crime stories, as opposed to horror, fantasy and action titles aimed at younger audiences.
Shares in Netflix were down 0.6% at US$526.92 in pre-market trading on Monday.