In its second quarter earnings results yesterday, Netflix reported that the streaming subscription service has grown to just over 209 million paid memberships worldwide. This represents an increase of 8.4% over the same period last year. Netflix also reported total revenue of $7.3 billion, a 19.4% increase year-over-year, and operating income of $1.8 billion.
Other quarterly highlights include the following:
- The company’s operating margin for the quarter was 25.2%, compared to an operating margin of 22.1% in Q2 2020.
- The company’s 2021 goal for operating margin is 20% for the full year, compared to 18% in 2020.
- The company’s net income for Q2 was $1.4 billion, or $2.97 diluted earnings per share. This is down from first quarter net income of $1.7 billion, or $3.75 diluted earnings per share.
- Revenue growth was driven by an 11% increase in average paid streaming memberships and 8% growth in average revenue per membership.
- Netflix added 1.5 million paid memberships during the second quarter, higher than the 1.0 million paid memberships the company estimated.
The company’s annual operating margin has risen steadily since 2016.
“After our big global launch in January 2016, we committed to steadily growing our operating margin thereafter at an average of three percentage points per year over any few-year period. Some years we’ll be a little over (like in 2020), some years a little under (like in 2021). Assuming we achieve our margin target this year, we will have quintupled our operating margin in the last five years and are tracking ahead of this average annual three percentage point pace,” said Netflix in their shareholder letter.
In the second quarter, Netflix released Shadow and Bone, a popular fantasy series based on the Grishaverse books. More than 55 million households watched this series within the first 28 days. Sweet Tooth was also a hit with 60 million households watching it in the first four weeks after release. Netflix has also expanded its selection of non-fiction offerings. Too Hot to Handle, The Circle and The Sons of Sam drew millions of viewers during the quarter.
The streaming platform’s original series and specials received 129 Emmy nominations this year, including The Crown with 24 nominations, Bridgerton with 12 nominations and The Queen’s Gambit with 18. Netflix reported it had spent $8 billion in cash on content during the first half of the year. The company continues to focus on providing non-English content to viewers.
“Our goal is to be everyone’s first choice for entertainment because of the variety and quality of our titles,” Netflix said.
In terms of competition, 40% of viewers in June 2021 watched cable and 23% watched broadcast. Streaming only represented 27% of all TV watched during the month, but Netflix was the leader, according to Nielsen.
The merger between Warner Media Group and Discovery and Amazon’s acquisition of MGM will create more competition in the streaming space. However, Netflix also noted that they compete for screen time with other apps and platforms like social media, mobile gaming and YouTube videos.
“…we are mostly competing with ourselves to improve our service as fast as we can. If we can do that, we’re confident we can maintain our strong position and continue to grow nicely as we have been over the past two-plus decades,” Netflix said.
Though COVID gave Netflix a bump in new members, Netflix continues double-digit growth, exceeding expectations in certain categories. By expanding into other arenas – podcasting, online store, video games – Netflix is diversifying its revenue streams and setting itself up for long-term success. They are not content to be the streaming leader. They continue to innovate and experiment to attract and retain members.