- Daily Zen
Netflix reported a sharp downfall in the number of new subscribers for its first-quarter results of 2021. The streaming service added just 4 million users in the new quarter, a sharp downfall from the previous high of 6 million, which was ascribed to the Pandemic by the company.
At the end of March, it had 208 million customers worldwide, missing its own forecast for 210 million.
Netflix also warned that the next quarter will see a similar flat customer base and forecast an addition of another million to the subscriber base in North America, its largest market.
“We believe that the growth of paid memberships has slowed due to the big advantage of Covid-19 in 2020 and a lighter content list in the first half of this year due to production delays of Covid-19”, Netflix told shareholders, warning that the pandemic would create “uncertainty” about its results.
In the same period a year ago, Netflix added 16 million viewers. It recorded 37 million new subscribers in 2020 in total.
The large subscriber growth has meant that Netflix could concentrate on increasing its content and cover operating costs.
For this year, revenue was up 24% from the same period last year to $7.2 billion, just above analysts’ forecast of $ 7.1 billion. The average revenue per membership rose 6% year over year. Net profit jumped to $1.7 billion from $700 million a year ago, which it attributed in part to production delays linked to Covid, which helped cut costs.
The company added that “We continue to anticipate a strong second half with the return of new seasons of some of our biggest hits and an exciting film lineup.
“In the short-term, there is some uncertainty from Covid-19; in the long-term, the rise of streaming to replace linear TV around the world is the clear trend in entertainment.”
In January, the company had announced that it no longer needed to raise money to cover production and operation costs.
Shares of Netflix dropped as much as 11% Tuesday, in late trading. Netflix has gained only 2 percent this year, after jumping more than 60 percent last year.
Analysts predicted an addition of 29 million subscribers for 2021, including 9.4 million in the first quarter.
Another question is about Netflix’s ability to maintain its competitive advantage over its peers, which include Apple, Disney and AT&T. With consumers presented with a wider variety and cheaper content, Netflix might find it difficult to add new users.
Citi analyst Jason Bazinet has put his bet on Disney. The analyst noted that though Netflix has a larger content base, but Disney scores better on quality of content on rating sites like IMBD. He notes that Disney’s lower pricing allows flexible bundling with other sites. He thinks Disney will pass Netflix in subscribers by 2023.
Netflix in its investors’ call sought to reassure managers that growth would be better in the second half with new shows ready to hit the market and the return of its past popular shows such as Sex Education and The Witcher. The group expects to spend $17bn on content this year, with production and filming returning after the rollout of vaccines.