While revenues were still up in the last quarter, Netflix’s share price took a hit thanks to a slowdown in subscriber growth.
The brakes may have been put on the streaming boom of the last year, with Netflix reporting a significant slowdown in subscriber growth in the last quarter and wiping a whopping $25bn off its market cap.
Netflix had expected to add more than 6m subscribers in the first three months of 2021, but in the end the figure was just under 4m. Its total number of subscribers stands at nearly 208m people.
The streaming giant saw record numbers of subscribers sign up in 2020 during the depths of global lockdowns, but that rate of customer growth didn’t carry through into the first quarter of 2021. As lockdowns ease and vaccines are rolled out, people won’t be stuck inside as much.
“We believe paid membership growth slowed due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays,” the company said in its shareholder letter.
While Netflix was able to attract 15.8m new subscribers in 2020, it also suffered during the pandemic as travel and lockdown restrictions greatly curtailed production on new shows and films.
“We had those 10 years where we were growing smooth as silk,” Netflix chief executive Reed Hastings said on the company’s earnings call yesterday (20 April). “It is just a little wobbly right now.”
According to Netflix, it expects to see turnaround in the second half of 2021 as new seasons of shows including You and The Witcher make their way to the streaming service.
The company said it will spend $17bn on content this year, which includes localised content for different markets and in different languages.
Netflix is no longer the main show in town for streaming either, with more rivals coming on the scene. Most notably, Disney+ has already amassed more than 100m subscribers since its launch in late 2019.
In its note to shareholders, Netflix acknowledged the ever-growing competition. “More and more new streaming services are launching, reinforcing our vision that linear TV will slowly give way to streaming entertainment,” it said.
User numbers aside, Netflix still saw its revenue numbers for the quarter go up. Revenue topped $7.1bn, up from $6.6bn in the previous quarter, with net income also up to $1.7bn. It is forecasting revenue of $7.3bn for the second quarter of 2021.