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How Will Netflix Counter Its Current Slowdown in Subscriber Growth?

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Part 3
How Will Netflix Counter Its Current Slowdown in Subscriber Growth? PART 3 OF 10

Is Netflix Experiencing a Slowdown in the United States?

Netflix’s growth in the United States

Netflix’s (NFLX) growth in the United States seems to be slowing. The company had total domestic streaming memberships of 50.9 million, in line with its internal estimates. However, the company’s net additions of 1.4 million new members fell short of its internal forecast of 1.5 million members.

The company had domestic streaming revenue of $1.5 billion and a contribution margin of 41.2%.

Is Netflix Experiencing a Slowdown in the United States?

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Netflix stated in its earnings letter to shareholders that from this year onward, it expects that its investors will measure its growth via its revenue growth and operating margin. 

For the past few years, Netflix has had flat operating margins as a result of its US (SPY) profits funding its international growth.

Reasons for Netflix’s lower-than-expected net additions

One reason for Netflix’s lower-than-expected net additions could be the increasing competition it’s facing in the United States. We’ll discuss more about how Netflix views its competition a little later in the series.

According to Netflix, another reason for its lower net additions could be that it’s moved the premiere of Season 5 of its popular show House of Cards to 2Q17 instead of 1Q17. Netflix stated during its 4Q16 earnings call that compared to newer shows, its top-rated shows with new seasons tend to be more popular among subscribers. Netflix noted that it has to build excitement around newer shows, which isn’t the case for its more established programs.

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