It seems as if Netflix’s crack down on geo-unblocking has slowed the streaming media service’s subscriber uptake to a crawl.

Back in September 2015, Netflix reported it had 25.9m international subscribers (outside the US). Four months later that subscriber number rose to 30 million, which isn’t a bad haul for such a short period of time.

With such a sharp increase witnessed while Netflix was officially unavailable in many regions, one would think that after it completed it’s global launch, subscribers would flood the service.

Instead, Netflix has been consistently revising its estimates for new subscribers downwards, and in its latest quarterly results which it released last night reported that for the period ending June 30th, international subscriber numbers had climbed just 1.5m, while US subscribers rose just 300 000.

In a letter to shareholders, Netflix explains this dip as a result of media coverage of the “un-grandfathering” process. This is its ungainly euphemism for raising subscription prices. Up until recently, longstanding members were still paying the price they signed up for despite increases for new members and extra fees for things like 4K streaming. Now they pay the same price as new members.

I think a careful reading of the letter suggests something else though. Something closer to home.

Just a couple of paragraphs later, the service admits that those who actually left the service because of “un-grandfathering” was “modest and conforms to our expectations”. So any effect from the price rise was already built into its predictions for subscriber increases, which it missed.

Was it banning Unotelly that broke it?

The question South Africans will ask is did banning geo-unblocking services like Unotelly and Borderless Internet have an effect?

For those who don’t know, prior to a few months ago these services allowed customers in areas like South Africa, where Netflix was either not available or has a much smaller catalogue of titles in its library than in the US, access the service as if they were based in another country. So we could watch US Netflix, which includes thousands of new movies and TV shows not available here. Following the official launch of Netflix globally in January, it began blocking the use of VPN services. This stopped members from accessing content outside of their territories.

The video-on-demand (VOD) service has become infamous for its clamp down on VPN and geo-unblocking services. The move left a sour taste in the mouths of many international subscribers which felt the offering in their country was lacklustre.

Two of our staff here at htxt.africa have cancelled the service outright, after they could no longer watch the full library of content, and other readers have confirmed they’ve done the same. The move even pushed some VPN providers to close shop.

Why do we think this is the reason for Netflix’ missing its target so dramatically? Because a close reading of the letter to shareholders reveals this key sentence:

Gross additions were on target, but churn ticked up slightly and unexpectedly

Translation: we hit our numbers for newcomers to Netflix, but we lost a lot more existing subscribers than we were expecting it to. “Churn ticked up slightly and unexpectedly” It’s only six words, but to me it says it all.

Why do people unsub from internet streaming services? Because there’s not enough content to keep them satisfied.

Still making bank

Despite this slow down in subscriber uptake, Netflix has increased its net income (earnings after expenses, taxes and interest). The net income for the period ending March 31st was reported to be $27.6m. At the end of June Netflix reported a net income of $40.7m.

So, while subscriber uptake has slowed down the service is making more money overall – as a result of that “un-grandfathering” process which sees individuals pay more.

The problem for Netflix remains one we’ve pointed out for a long time. It’s US business is highly profitable, but its international business is losing money hand over fist. Despite the increase in overall revenue, Netflix lost almost $100m on servicing customers outside of the US. With the share price dropping fast today and concerns that international subscribers just aren’t happy with the library Netflix offers (at the same price as the US one, note) is Netflix’ vision of being the default global provider of streaming TV still viable?

Come back next quarter to find out.[Additional words by Adam Oxford]