The Highs and Lows of Netflix during the pandemic
Netflix reported a dramatic slowdown in subscribers in the first three months of 2021, ending a record run in growth during the coronavirus pandemic.
The movie and TV-show streaming service, which has US$40.2 billion in annual revenues, lost 134,000 domestic subscriptions in the first quarter compared to the same period last year – a drop of 3%. For the year to date, it had suffered a 15% slump.
Netflix said that “high-quality content” was not at fault for its slowdown. It cited an increased focus on original content, including the return of “Gilmore Girls” and the debut of its first live-action series, “Bojack Horseman”.
The company announced that it had ordered a second series of “Orange Is the New Black”, adding that it would also be producing two new live-action shows.
It said it is expected to release seven Netflix originals in 2020, including films from Adam Sandler and Will Smith.
That year is shaping up as a crucial one for Netflix. It has committed to spending US$6 billion on 700 hours of original content.
A recent Morgan Stanley report said that it would need to invest between US$7.5 billion and US$8 billion by the end of 2020 to meet its global expansion ambitions.
“The extraordinary events of Covid-19 led to unprecedented membership growth in 2020, as it pulled forward growth from 2021, and delayed production across every region,” the company wrote in a letter to shareholders.
“As we discussed in past letters, these dynamics are also contributing to a lighter content slate in the first half of 2021, and hence, we believe slower membership growth.”
The role of competitors!
Netflix is also facing stiffer competition in streaming with new services from Disney’s Disney+, Comcast, NBCUniversal’s Peacock as well as Amazon Prime, Apple, and Hulu.
But the company dismissed competition for its subscriber miss.
“We don’t believe competitive intensity materially changed in the quarter or was a material factor in the variance as the over-forecast was across all of our regions,” it said.
Financially, Netflix’s latest quarter was in line with expectations. The company’s revenue grew 24% year over year.
This year Netflix hopes to ramp up its offerings with new series of hit shows including Sex Education, The Witcher, and You as well as big-budget, large scale and star-driven features such as Red Notice, starring Gal Gadot, Dwayne Johnson, and Ryan Reynolds and Don’t Look Up, with a Leonardo DiCaprio, Jennifer Lawrence, Cate Blanchett, Timothée Chalamet and Meryl Streep.