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Netflix Subscriber Growth Beats Expectations Amid Coronavirus Pandemic

George Kamau by George Kamau
April 22, 2020
in News
Reading Time: 4 mins read
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netflixNetflix has seen a spike in new subscriber growth as more people stay at home to mitigate the spread of the novel coronavirus alongside other streaming services that have felt the impact of COVID-19.

We now know the exact numbers as Netflix released their earnings report on Tuesday evening and surprisingly exceeded Wall Street expectations.

Wall Street was expecting $1.65 earnings per share with $5.76 billion and 8.47 million global subscribers. Netflix itself was expecting 7 new million subscribers.

Beating expectations, Netflix reported $1.57 earnings per share, $5.77 billion in revenue and 15.77 million new subscribers with most of that coming from Europe, the Middle East and Africa region(EMEA).

However, its net income of $709 million ($1.57 earnings per share) was slightly lower than what Wall Street expected($1.65 EPS).

Globally, the platform now has a total of 182.9 million subscribers as at the end of Q1 – which is itself up 22.8% from last year.

The streaming giant also told its shareholders that viewership and subscriptions would decrease as governments around the world ease restrictions on lockdown. In the next quarter, Netflix guesstimates that they’ll see 7.5 million new global subscriber additions and even lower in the third quarter.

Intuitively, the person who didn’t join Netflix during the entire confinement is not likely to join soon after the confinement

This will likely be a result of job cuts or salary cuts and subscribers will cut subscriptions and move to free or cheaper streaming services.

Netflix estimates that by the end of Q2, they’ll have more than 190 million global subscribers.

It’s worth noting Netflix added an emotional tone to its letter to shareholders.

“We have never seen a future more uncertain or unsettling. The coronavirus has reached every corner of the world and, in the absence of a widespread treatment or vaccine, no one knows how or when this terrible crisis will end.”

https://twitter.com/loudmouthjulia/status/1252720446853832704

“It’s an incredible tragedy for the world. Everyone is wrestling with the implications, both on health, hunger and poverty, and we too are really unsure about what the future brings,” said Reed Hastings, Netflix CEO.

Unlike other streaming platforms that had recently launched with a much smaller catalogue – most production houses stopped shooting to follow stay at home orders – Netflix said it’s still on track to release shows and films that were slated for the second quarter with most filming already complete.

“Our 2020 slate is largely shot and we’re pretty deep into our 2021 slate,” said Ted Sarandos, the head of Netflix’s content division. “We don’t anticipate moving the schedule around much.”

“We work really far out relative to the industry,” he said with regards to their binge-release strategy.

“No one knows how long it will be until we can safely restart physical production in various countries, and, once we can, what international travel will be possible, and how negotiations for various resources(talent, stages, and post-production) will play out. The impact on us is less cash spending this year as some content projects are pushed out. We are working hard to complete the content we know our members want and we’re complementing this effort with additional licensed films and series,” the investor letter reads.

One unintended consequence — Netflix isn't paying as much $ on content as it expected with Hollywood shut down. So it's temporary free cash flow positive ($162m for the quarter) and has more than 12 months of liquidity. Netflix finished the quarter with $5.2b in cash

— Alex Sherman (@sherman4949) April 21, 2020

“Our productions, our post-productions, our offices are now distributed into people’s living rooms and bedrooms and kitchens around the world. It’s just an incredible testimony to the innovation that literally within a few hours, but certainly, within a few days of the shutdowns, we had production up and running remotely, post-production up and running remotely, animation up and running remotely, pitch meetings happening virtually, writers rooms assembling virtually,” said Sarandos in an earnings interview.

https://twitter.com/jamestitcomb/status/1252690612001755136

New shows set to stream this coming quarter include Lovebirds, a comedy by Kumail Nanjiani and Issa Rae, Enola Holmes which features Stranger Things’ Millie Bobby Brown, Space Force and Hollywood.

Netflix gives a snapshot of pandemic-related economic ripples.

No dubbing in Italian because voice actors are shut in, for example. Netflix is tinkering with the product less. (Unclear if this is to not annoy customers, or not to stress staff.) https://t.co/Lg1giuZysY

— Shira Ovide (@ShiraOvide) April 21, 2020

Netflix also released viewership numbers for some of its popular programs:

  • Tiger King: 64 million
  • Ozark: 29 million
  • Love is Blind: 30 million
  • Money Heist(La Casa de Papel): 65 million
  • Spencer Confidential: 85 million

https://twitter.com/loudmouthjulia/status/1252725767009710080

Netflix recently made some of its award-winning documentaries free to watch on YouTube including Our Planet, an 8 Part series narrated by Sir David Attenborough.

Here's the @netflix Q2 (ended March 31) letter to shareholders. It's added 2,000 more call centre agents. Revenue shot up 28% compared to Q1 2019. Added 15.8M subs since end of Dec. 2019. https://t.co/Ira1FL56dV

— Cartt.ca (@CarttCa) April 21, 2020

Locally, Safaricom reported that Netflix traffic was up 4 times to 60GBps with the network itself reporting a 40% traffic surge in data. Safaricom’s CEO, Peter Ndegwa, said that their combined mobile and fixed home internet reached 2.34 petabytes per day. That translates to an average of 97Gbps per hour on their network.

Netflix proves it is still king as other streaming platforms lag behind such as Disney Plus that recently reported having over 50 million subscribers while Comcast’s Peacock has 15 million subscribers.

However, Reed noted Disney Plus’s fast growth.

“Over 20 years of watching different businesses, incumbents like Blockbuster and Walmart… I’ve never seen such a good execution of the incumbent learning the new way and mastering it. My hat’s off to them,” he said.

Tags: Covid-19Netflix
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George Kamau

George Kamau

I brunch on consumer tech | [email protected]

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