Netflix forecasts slower growth in third quarter of 2020 after 'initial shock' of coronavirus-induced spike

Netflix added 2 million fewer customers in the past six months as it did for all of 2019.

FP Staff July 17, 2020 08:33:45 IST
Netflix forecasts slower growth in third quarter of 2020 after 'initial shock' of coronavirus-induced spike

Nearly 26 million subscribers joined Netflix during the first six months of 2020 — more than double the number compared with last year — as the pandemic curtailed travel and even nights out on the town. The restrictions have turned out to be a boon for Netflix, which also faces a slew of new streaming competitors such as Disney+ and HBO Max.

The company picked up 10.1 million worldwide subscribers during the April-June period, more than triple of what it usually adds in that period.

Netflix, however, said its subscriber growth has begun to slow following the “initial shock of COVID and social restrictions” after it added just 2 million fewer customers in the past six months as it did for all of 2019. It forecasts just 2.5 million new additions for the current quarter.

(Also read on Firstpost — Coronavirus Outbreak: Netflix adds 15.8 mn subscribers worldwide in 3 months; CEO warns pandemic-fueled spike temporary)

The pandemic has shut down Hollywood, limiting the ability of TV and movie studios to produce more entertainment to feed Netflix and other video streaming services. That could limit their appeal if viewers run out of new things to watch. Netflix said on Thursday, 16 July, that it is slowly resuming production, mostly in Asia and Europe, and its 2020 lineup remains intact. Shooting delays mean big shows and movies slated for next year will come out more in the second half of 2021.

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Netflix. Image: Reuters.

People spending more time at home due to the pandemic has “massively accelerated the shift” from traditional TV to streaming video,” said eMarketer analyst Eric Haggstrom in an email. That bodes well for Netflix, the streaming pioneer. “Even as lockdowns are relaxed and new competitors begin to scale their services, Netflix will extend its lead as the first stop for entertainment.” He predicts that Netflix will get one-third of streaming subscribers globally in 2020.

The Los Gatos, California, company’s extraordinary expansion helped Netflix earn $720 million on revenue of $6.15 billion during the second quarter.

Investors have been betting the pandemic will make Netflix more popular than ever. Since public health experts officially declared the pandemic on 11 March, Netflix’s stock has soared by 50 percent.

Netflix added a flood of new subscribers amid the coronavirus pandemic and also offered clues to a possible successor for founding CEO Reed Hastings, who on Thursday named the company’s chief content officer, Ted Sarandos, as co-CEO.

But it was investor disappointment in the outlook for new subscribers that helped drive down the stock 9 percent to $480.70 in after-hours trading.

Sarandos, who joined Netflix over 20 years ago, will also join the Netflix board of directors. “Ted has been my partner for decades. This change makes formal what was already informal — that Ted and I share the leadership of Netflix,” said Hastings in a statement.

In a post-earnings video conference, Hastings nonetheless said he plans to stay with the company for the next decade and added the setup means the pair will serve as “full-time” executives, rather than two part-time CEOs splitting the role.

The increase announced on Thursday with Netflix’s second-quarter earnings eclipsed the gain of 8.3 million subscribers projected among analysts polled by FactSet. Netflix ended June with 193 million worldwide subscribers, including 70 million in the US and Canada, its largest geographic market.

(With inputs from The Associated Press)

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