Netflix plunges after pandemic boom ebbs
Netflix credited the pandemic with delivering record growth in 2020. Now it’s blaming the pandemic for the worst first quarter in eight years.
The streaming service added far fewer new customers than Wall Street expected in the first three months of 2021, even missing its own forecast by millions of subscribers.
And the current quarter will be more challenging, Netflix said Tuesday, predicting a gain of just 1 million new customers — or a fraction of the 4.44 million projected by analysts.
The dismal growth sent shares plunging Wednesday.
Netflix has been warning for months that growth would slow after customers emerged from their COVID-19 hibernation, but few expected the company to stall so dramatically.
The first quarter of 2020 was the strongest in its history, reeling in 15.8 million new customers, and Netflix’s pace was still brisk in the fourth quarter.
“We had those 10 years where we were growing smooth as silk,” Executive Chairman and co-Chief Executive Officer Reed Hastings said on a webcast for investors. “It’s a little wobbly right now.”
Netflix added 3.98 million subscribers in the first quarter, compared with an average analyst estimate of 6.29 million and its own forecast of 6 million. That marked the weakest start of a year since 2013, when Netflix added about 3 million customers. If the company’s forecast for the current quarter holds, it will be the worst three-month stretch for Netflix since the early days of its streaming service.
Netflix blamed a “COVID-19 pullforward” effect, meaning the pandemic accelerated its growth in 2020 while everyone was stuck at home and needed something to watch. Now that surge is taking a toll on the company’s 2021 results.
“It really boils down to COVID,” Spencer Neumann, the company’s chief financial officer, said on the webcast.
A lack of new shows also contributed to the slump, the company said.
While there were popular hits available, like “Bridgerton” and “Cobra Kai,” fresh releases tailed off after mid-January and growth faltered.