Netflix Subscriber Growth Slows as Economies Reopen
By Micah Maidenberg
Netflix Inc. said subscriber growth for the first quarter was
weaker than expected, a potential warning sign for the company as
consumers in many countries start to emerge from pandemic-related
lockdowns and as streaming competition increases.
The company on Tuesday said it added another four million
subscribers on a net basis globally between January and March,
fewer than its forecast of six million.
The gain in the first quarter was also far below the 15.8
million subscribers it gained for the year-earlier period, when the
spread of the coronavirus was first intensifying.
Netflix said in a letter to shareholders it believed subscriber
"growth slowed due to the big Covid-19 pull forward in 2020 and a
lighter content slate in the first half of this year, due to
Covid-19 production delays."
The company reported a quarterly profit of $1.71 billion, or
$3.75 a share, compared with $542.2 million, or $1.19 a share, for
the year-earlier period. Revenue rose to $7.16 billion from $6.64
The company had forecast $1.36 billion in net income and $7.13
billion in revenue for the period.
Shares fell 11% in after-hours trading. The stock is up nearly
26% over the last 12 months.
Netflix's subscriber base jumped by roughly 37 million on a net
basis during 2020 to reach 204 million by the end of December, a
performance that further cemented its powerful status in the
content-streaming market. Executives at the Los Gatos, Calif.,
company have said the pandemic pulled forward demand because
alternative entertainment options dried up.
"There's a boost in engagement that you get when people are in a
lockdown situation," Netflix operations chief Gregory Peters said
at an investor event last month.
Many consumers who get vaccinated are venturing out of their
homes more and shifting spending despite the lingering threat posed
by coronavirus. Airlines are looking for a resurgence in summer
travel. Movie theaters and other venues have reopened in New York,
Los Angeles and elsewhere. Restaurants and hotels, both hard hit by
pandemic-related closures and restrictions, have stepped up
Netflix made a number of changes last year amid the surge in new
subscribers. The company said in July that it promoted Ted Sarandos
to co-chief executive, a position he holds along with Reed
Hastings. In October, Netflix boosted the monthly price of its most
popular streaming plan by $1 to $13.99 a month, and its premium
offering by $2 to $17.99 a month.
Netflix increased the prices as other media companies have
expanded their own streaming platforms, often working to draw in
users with lower monthly rates. Newer services include Walt Disney
Co.'s Disney+, Apple Inc.'s Apple TV+ and AT&T Inc.'s HBO Max.
Discovery Inc. launched Discovery+ in the U.S. in January.
ViacomCBS Inc. launched the Paramount+ service in the domestic
market last month.
Many competing streaming services "are priced at a discount to
Netflix," analysts at Raymond James said in flagging the company's
increase as a potential risk for subscriber retention.
In January, Netflix said it had been expecting more competition,
and that was why the company had been building up its portfolio of
original shows that appeal to a broad set of consumers world-wide.
The company has been working to secure rights to content from other
studios too, recently signing a deal with Sony Pictures
Entertainment for domestic streaming rights to its theatrical
Some analysts have said Netflix's command on consumers has
slipped recently and forecast slower growth ahead. The company
controlled half of demand for original content globally in the
first quarter, down from 54% for all of last year, according to
Parrot Analytics, which measures streaming.
EMarketer expects the average amount of time consumers in the
U.S. will spend each day using Netflix will rise 3% this year over
2020. Between last year and 2019, consumer usage jumped 20% to more
than 31 minutes a day, according to the firm.
Some Netflix subscribers may notice other changes to their
service. Last month, the company began experimenting with greater
password enforcement to prevent users from sharing their
Write to Micah Maidenberg at email@example.com
(END) Dow Jones Newswires
April 20, 2021 16:31 ET (20:31 GMT)
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