Monday, November 30, 2020

Netflix new subscriber sign-ups plummeted over the summer, marking the end of pandemic-fueled growth

Oct 21. 2020
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By The Washington Post · Steven Zeitchik · BUSINESS, ENTERTAINMENT, TV 

People went outside, and Netflix subscriptions started going down.

That was the lesson from the streaming giant Tuesday, as the company reported that its quarterly net subscriber gains dipped below 10 million for the first time since the start of the pandemic, to just 2.2 million over the summer.

The streaming company had seen massive subscriber spikes since early 2020, gaining 16 million global subscribers in the quarter ending in March, as stay-at-home orders dominated in Europe and began taking hold in the United States. Robust growth continued in the spring, with the period from April to June seeing Netflix rack up a net addition of 10.1 million subscribers around the world.

But July, August and September - historically a strong quarter for Netflix - saw much slower growth, including just 177,000 adds in the United States. The period was one in which many Americans emerged from shutdowns to gather in outdoor locations. In contrast, Netflix had drawn nearly 3 million new American subscribers in the spring.

"As expected, growth has slowed," the company's executives said in a letter to investors. "We think this is primarily due to our record first half results," it added, suggesting that many people who would think about subscribing during the pandemic already had.

The 2.2 million figure is also way down from the 6.7 million Netflix added in the same period last summer.

While the numbers could be viewed as partly a function of subscriber cancellations over the controversial "Cuties," data has shown this is not likely to have a material impact. 

With $6.43 billion in quarterly revenue, Netflix exceeded forecasters' projections of $6.38 billion. But earnings per share of $1.74 came in well below expectations of $2.14.

Analysts are unlikely to be concerned with the subscriber slowdown, though, in part because the company is approaching 200 million worldwide subscribers. Its official count was 193 million coming into the quarter. Those figures are well above its nearest streaming competitor, Disney Plus, which several months ago reported it had topped 60 million subscribers worldwide.

On a call with investors, Netflix chief financial officer Spence Neumann said that the firm's "general underlying metrics are very healthy," while co-chief executive Reed Hastings added that "We've been doing high 20 [million] net adds per year for four years. And this year on guidance it'll be 34 million. So we'll set all kinds of new records this year."

Netflix executives noted in their letter that the company had racked up more than 28 million global subscribers so far this year, surpassing the 27.8 million it gained in all of 2019.

Even as it touted the subscriber numbers, the company has been canceling a number of shows in recent weeks, including fan favorites "Glow," "The Society" and "Altered Carbon," often for apparent covid-related cost issues. On Monday, it canceled the outerspace drama "Away" after one season.

On the call, Netflix co-chief executive Ted Sarandos also addressed the surprise departure of the originals executive Cindy Holland last month, saying he wanted to "restructure the content team to. . ..have one global organization." Holland drove early series like "House of Cards" and "Orange Is The New Black" and was replaced in an unexpected move by Bela Bajaria, who previously ran local-language originals.

A fall and winter in which rising virus rates and cold weather are expected to drive people inside could keep Netflix subscriber numbers high.

Meanwhile, the lack of new movies in theaters could ensure people turn to the streaming giant for their entertainment fix. Already, Aaron Sorkin's war-protest legal drama "The Trial of the Chicago 7," and Darren Star's dramatic comedy "Emily in Paris" are among the most talked-about pieces of content this fall, with a new take on the Daphne du Maurier's gothic novel "Rebecca" starring Lily James expected to further drive conversation this month.

The company said one of its most-viewed shows in the most recent quarter was "Ratched," Ryan Murphy's spinoff of sorts from "One Flew Over the Cuckoo's Nest"; at least a few minutes of the series were viewed by 48 million households in its first four weeks of release.

Netflix, which has benefited from Oscar-nominated movies such as "The Irishman" and "Roma" in recent years, is likely to really reap its rewards this year. New rule changes allow for movies to qualify this year without playing in theaters, broadening Netflix's potential base of contenders. And many studios have postponed their films until later in 2021, thinning out the field.

Netflix's stock price, which has risen 80% since the start of shutdowns in mid-March, was down 6% in after-hours trading Tuesday.

 

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