Netflix sees record number of new subscribers but forecasts slowdown
Streaming service Netflix faces more challenging times ahead despite positive figures in its latest financial results, according to industry analysts.
The online video streaming giant revealed revenue of 1.8 billion US dollars (£1.25bn) for the first quarter of 2016, with membership numbers rising more than 6.7 million to 81.5 million - up from just over 62 million members this time last year.
The number of new subscribers was a record in a single quarter for the company, but Netflix did suggest it expects the number of new customers joining the service to slow in the next quarter.
The service suggested numbers would rise by only around 2.5 million in the next three months.
Industry analysts pointed to increase in competition in video streaming as the reason for the slowdown, with Amazon's Prime Video service, Sky's Now TV, and the range of on-demand and online store all fighting with Netflix for market share.
Netflix also recently announced a price increase for early adopters of the service, who were receiving the platform's mid-level package but on the bottom-tier price.
They are now being brought in line with the prices new subscribers are offered, meaning an increase of £1.50 a month for some to keep the same package.
Paolo Pescatore from analyst firm CCS Insight said: "Netflix had a good quarter in terms of subscribers.
The key highlight was record net additions which validates its strategy to expand rapidly into new markets and represented the bulk of these new subscribers.
"However, the next two quarters will be challenging as historically subscriber growth has slowed down.
"Furthermore, competition in its home market is intensifying, more so with new providers launching OTT video services and Amazon has launched a new monthly paid for video service.
"And with the new price increase, this may lead to higher churn and sway some subscribers from signing up."
The average time spent watching streaming services nearly doubled between 2014 and 2015 - rising from 40 minutes a week to 77 - according to industry marketing firm Thinkbox, as the number of services on offer expanded rapidly.
Joe Rundle, from financial firm ETX Capital, suggested that Netflix could become a "takeover target" if competition continues to flood the market.
"Amazon's cheeky decision to announce its own monthly subscription streaming service just before Netflix posted its results reinforced the view that this is a highly competitive market where friends may be needed," he said.
"If Netflix gets cheaper it could become a takeover target, particularly for any one of the many traditional media companies that want a piece of the on-demand pie.
"One such firm is Disney, which has very close ties with Netflix already and could be tempted if the price is right."