Despite a surge in new Netflix subscriptions during the Covid-19 pandemic, uptake is expected to slow in Q3 and production will be delayed on some of its big titles.
It was a mixed earnings report for Netflix in Q2 as analysts were eager to see how the streaming giant performed when almost half the world was asked to stay at home during the Covid-19 pandemic.
The figures for the quarter showed that Netflix added just over 10m new paid subscribers, which was substantially more than the 8.07m that analyst firm Refinitiv had predicted. This helped push Netflix revenues up by almost a quarter to $6.15bn in Q2, surpassing estimates of $6.08bn.
Netflix also announced a number of new management changes to the company, with chief content officer Ted Sarandos being named co-CEO along with Reed Hastings, while Greg Peters will be taking on both the roles of chief operating officer and chief product officer.
In a blog post, Hastings said he does not expect much to change in the day-to-day running of the company, emphasising that he is “committed to Netflix for the long term” but the decision is part of the “long process of succession planning”.
Despite the positive figures for Q2, Netflix’s stock was down by almost 9pc in after-hours trading. According to CNBC, this was because the number of paid subscribers the streaming giant expects to add in Q3 are almost half of what analysts predicted. In a letter to shareholders, Netflix executives said: “Growth is slowing as consumers get through the initial shock of Covid and social restrictions.
“Our paid net additions for the month of June also included the subscriptions we cancelled for the small percentage of members who had not used the service recently.”
Netflix also said that following Covid-19, production on some of its biggest titles will likely be pushed out towards the end of 2021, but that “the total number of originals for the full year will still be higher than 2020”. It added that pauses in production are impacting its competitors and suppliers in the same way and so the company believes its customer satisfaction will “remain high”.
It found that a “very small percentage” of its customers have not watched anything in the last two years, despite still paying the monthly subscription. Netflix said that it has decided to stop billing them and will do the same for those meeting this criteria going forward.
“While this change resulted in a slight hit to revenue, we believe that pro-consumer policies like this are the right thing to do and that the long-term benefits will outweigh the short-term costs,” the company said.
Addressing its competition, Netflix now counts TikTok as one of its biggest rivals, describing its growth as “astounding”.
“Instead of worrying about all these competitors, we continue to stick to our strategy of trying to improve our service and content every quarter faster than our peers,” executives said.