Shares in Netflix plunged more than 15% after the online streaming giant released its financial results for Q1 of 2016 along with its forecasts for the coming quarter.
The financial results were strong, with revenue up 24% year-on-year to $US1.96 billion, but the predictions for the coming quarter and a slowing international uptake proved concerning for investors.
Netflix went live simultaneously in 130 countries in January, building high expectations for international growth, but the tech company is predicting it will add only two million new international subscribers in Q2, down from 2.37 million added last year.
This forecast is also well below Wall Street’s prediction of 3.45 million new international subscribers in Q2.
While some might point to the substantially smaller libraries that Netflix offers in other countries for a declining interest, in a letter to investors the company blamed the quick uptake from Aussie subscribers when the streaming service launched last year for the disappointing forecasts.
“Our international forecast for fewer net additions than prior year is due to a tough comparison against the Australia / New Zealand launch,” the letter says.
“The ANZ growth spike in Q2 last year results in international Q2 adds more than doubling year-over-year. While ANZ is growing steadily this Q2, it is less than the launch spike last year.”
The letter goes on to say that if not for pesky Australia and New Zealand, international growth would be stronger than last year.
Investors didn’t like what they saw though, with shares falling by more than 15% before steadying at a 10% drop.
The huge launch in January saw Netflix become available in nearly every country in the world except for China, but the letter says the company has no clear plans in breaking into that market just yet.
“We are continuing discussions but have no material update on our approach or timing,” the letter says.
“What we do will have only a modest financial effect in the near-term.”
In the investor update, Netflix also continued to try to turn attention away from its general library, which differs drastically country-to-country, and towards its original content, with original films now accounting for 5% of the company’s entire content budget.
“We had our most ambitious slate of content releases to date,” the letter says.
“We have debuted at least one new show or feature film every single week of the quarter.
“With our footprint now virtually global, Netflix is uniquely positioned to bring stories from all over the world to people all over the world.”
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Denham Sadler is a former editor of StartupSmart. He was previously a journalist at the publication and has worked as a freelancer for the Guardian, the Saturday Paper and the ABC. In his spare time he likes puns and jaffles.
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