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 billion.

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 hiring.

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 movies.

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 accounts.

Write to Micah Maidenberg at micah.maidenberg@wsj.com

 

(END) Dow Jones Newswires

April 20, 2021 16:31 ET (20:31 GMT)

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