Netflix misses targets after stellar start to pandemic
● Netflix credited the pandemic with delivering record growth in 2020. Now it’s blaming the pandemic for its 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, predicting a gain of just 1-million new customers — far fewer than the 4.44-million projected by analysts.
Netflix warned that growth would slow after customers emerged from their Covid19 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 chair and coCEO 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 forecast of 6-million, marking the weakest start of a year since 2013.
Netflix blamed a “Covid-19 pull-forward” 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.
A lack of new shows also contributed to the slump, the company said. There were popular hits like Bridgerton and Cobra Kai but fresh releases tailed off after mid-January and growth faltered.
The pandemic has pushed the release of many of the company’s key titles into the back half of this year as production was interrupted in 2020 because of the fallout from the pandemic. Most movies and programmes were postponed or cancelled.
Netflix rejected the idea that competition factored into its results, noting that its growth slowed globally, not just in the crowded US streaming market. Disney+, HBO Max and Peacock don’t yet compete with Netflix in many parts of the world. Still, the company faces more rivals than ever.
The company’s answer to the challenges remains the same as ever: produce more shows. Netflix plans to spend $17bn (R242bn) on programming this year, up from $12.5bn last year and $14.8bn in 2019.
It is prioritising investments in programming outside the US, where most of its new customers live.
Europe continues to be a bright spot for Netflix. The streaming service added 1.81-million customers across Europe, the Middle East and Africa, making it the leading region for the company.
Lupin, a French heist thriller, was the service’s most popular new series in the quarter. Asia is the company’s second-fastestgrowing region.
Even with growth decelerating, Netflix is in the strongest financial position in its history. It reported net income of $1.71bn, more than double from a year ago, and generated free cash flow of $692m during the quarter.
While some of this is due to the curbs in production, it also reflects a stronger foundation.
A lack of new shows contributed to the slump, the company said