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)
Copyright (c) 2020 Dow Jones & Company, Inc.
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