NFLX Netflix Inc

By Joe Flint and Micah Maidenberg 

Netflix Inc. added more than twice as many net new subscribers as it had expected in the first quarter, as consumers in many countries stayed at home due to the coronavirus pandemic and hunted for ways to entertain themselves.

The streaming giant said Tuesday it added 15.8 million new net paid subscribers around the world during the quarter. It had expected to add 7 million for the period. In the first quarter a year ago, Netflix added 9.6 million new subscribers globally.

"Like other home entertainment services, we're seeing temporarily higher viewing and increased membership growth," Netflix said in its letter to shareholders. "We expect viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon."

Shares rose 1% in after-hours trading. The stock is up 34% year to date, making the streaming service one of the few companies to see its shares appreciate since the coronavirus crisis started.

Most of the company's subscriber growth occurred outside North America. Netflix said it added almost 7 million subscribers in the region including Europe and the Middle East, 2.9 million in Latin America and 3.6 million in Asia.

In the U.S. and Canada, where it faces more competition as other media companies launch their own streaming services, Netflix reported 2.3 million new paid subscribers, compared with a gain of 548,000 in the fourth quarter and 1.9 million in the first quarter a year ago.

Netflix said it generated revenue of $5.77 billion for the first quarter, up from $4.52 billion a year earlier. Analysts had forecast $5.75 billion in revenue for the latest period.

Profit rose to $709.1 million, or $1.57 a share, from $344.1 million, or 76 cents a share, the year earlier. The company was expected to earn $1.64 a share, according to estimates compiled by FactSet.

The pandemic has shut down movie theaters as well as most television and movie productions. Professional sports leagues have suspended seasons, and live concerts and other events have been canceled. Millions of people are looking for entertainment options and viewership for both traditional broadcast and cable television, as well as streaming platforms, has been on the rise.

Americans spent an average of $37 a month on streaming services in March, up from $30 in November, according to a recent survey by The Wall Street Journal and the Harris Poll.

Despite the production shutdown, Netflix said the bulk of its animation production team is working from home. It also has more than 200 projects in postproduction, which can also be done during the quarantine. Writers on existing series are continuing to work on new scripts.

Netflix said the production shutdown will only have a "modest impact" on new content in the second quarter. For the year, the company anticipates spending less as projects are pushed into next year. At the same time, Netflix is aggressively acquiring content from third-party suppliers.

"We are working hard to complete the content we know our members want and we're complementing this effort with additional licensed films and series," Netflix said.

Usage was boosted in the quarter by several popular original efforts, including the third season of the drama "Ozark" and the documentary series "Tiger King: Murder, Mayhem and Madness." Netflix said "Tiger King" was sampled by 64 million member households. Its unscripted dating show "Love is Blind" also broke through with 30 million member households tuning into some or all of the series.

The increase in subscribers and viewing hours put pressure on internet capabilities in some parts of the world during the quarter. Netflix reduced bandwidth in Australia, Mexico, India and elsewhere after requests from local governments. Netflix said the quality of its service was maintained and it is working with internet service providers to increase capacity.

The company said its service has seen "significant disruption when it comes to customer support and content production." Netflix said it has added 2,000 remote agents to handle the surge in customer calls which are an offshoot of the increased demand for content.

Netflix is facing heightened competition from traditional media. Walt Disney Co.'s Disney+, which launched last November and costs $6.99 a month, said earlier this month it has surpassed 50 million paid subscribers world-wide.

WarnerMedia, a unit of AT&T Inc., said Tuesday its new streaming service HBO Max, will launch May 27 at a monthly fee of $14.99. Comcast Corp.'s Peacock platform made its debut in the cable giant's homes last week and will be available nationally in July.

Apple Inc. also launched a streaming option last fall called Apple TV+.

The recent Journal-Harris Poll survey found Netflix was the biggest streaming beneficiary in the crisis, with some 30% of respondents saying they added a Netflix subscription in March.

Netflix said its deep reserve of acquired and original content likely puts it in better position to weather the pandemic than its rivals.

"Since we have a large library with thousands of titles for viewing and very strong recommendations, our member satisfaction may be less impacted than our peers' by a shortage of new content, but it will take time to tell," the company said.

Write to Joe Flint at joe.flint@wsj.com and Micah Maidenberg at micah.maidenberg@wsj.com

(END) Dow Jones Newswires

April 21, 2020 17:25 ET (21:25 GMT)

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