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Technology

Netflix looks to India and beyond after first drop in US subscribers

Streaming giant bets on new content and cheaper plans to win users

Netflix plans to add five new series to its lineup of Indian content this year.

PALO ALTO, U.S. -- Netflix's first ever drop in U.S. subscribers has the streaming giant pinning its hopes for growth on India and other international markets.

On Wednesday, the company reported disappointing second-quarter earnings, as well as a loss of nearly 130,000 paid subscribers in its home market. Netflix had projected in the first quarter that it would gain more than 350,000 U.S. subscribers in the three months through June.

Netflix blamed the drop on a lack of fresh content and a price hike in the U.S. earlier this year. The company's shares plunged more than 10% in the after-hours trading session Wednesday.

Globally, Netflix reported a net addition of 2.7 million subscribers over the past quarter, well below the 5 million it had forecast in earlier in the year.

In the earnings call on Wednesday, Netflix said its international operations are poised for strong growth. 

In India, one of the biggest emerging markets for global tech companies, the streaming giant plans to add five original series and one movie this year. It will also roll out a mobile-only streaming plan for India that is cheaper than its current plans in the third quarter.

This mobile-only plan, the company said in a letter to investors, "will be an effective way to introduce a larger number of people in India to Netflix and to further expand our business in a market where Pay TV ARPU (average revenue per user) is low (below $5)."

The company did not specify exactly how much it intends to charge for the new plan, but Ted Sarandos, Netflix's chief content officer, said the company is committed to expanding in India.

"Growth in that country is a marathon, so we are in for the long haul and we are seeing nice steady progress," Sarandos said in the earnings call.

Netflix faces a crowded market in India, where affordable streaming services offering content in a variety of local languages already boast millions of users.

Nevertheless, India and other international markets are increasingly important for Netflix as the company faces growing competition at home. The company is expected to see further subscription cancellations in the U.S. when it loses two of its most-watched shows -- "Friends" and "The Office" -- in 2021.

"Netflix is learning the hard way what old school studios have known for a long time: to be competitive and cash-efficient, you’ll need to build a solid library of original content with fewer, bigger projects," said Stephan Paternot, CEO of film finance marketplace Slated. "Everyone is moving to the subscription model, so start finding -- and owning -- those blockbuster projects and binge-worthy shows if you want to stay afloat."

The company reported second-quarter net income of $271 million, compared to the $384 million same periods last year. Revenue grew to $4.92 billion from $3.91 billion a year ago.

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