Netflix’s subscriber growth, stock zapped as pandemic eases – WSVN 7News | Miami News, Weather, Sports
SAN RAMON, Calif. (AP) – Netflix’s rapid subscriber growth is slowing far faster than expected as people cooped up at home during the pandemic can get off and do other things.
The video streaming service added 4 million more subscribers worldwide from January to March. This was the lowest gain in this three-month period in four years.
The performance reported Tuesday was about 2 million fewer subscribers than both management and analysts had predicted Netflix would add in the first quarter.
It was a big drop from the same time last year when Netflix added nearly 16 million subscribers. It was just as governments around the world were imposing bans that created large audiences for the leading video streaming service in captivity.
As a sign that the trend is continuing, Netflix forecast an increase of just 1 million subscribers worldwide for the current April-June period, compared to an increase of 10 million subscribers at the same time last year.
Poor results at the start of the year rocked investors, causing the company’s Los Gatos, Calif. Shares to fall more than 9% in expanded trading, despite Netflix sales meeting analyst targets and earnings beating estimates.
Netflix earned $ 1.71 billion, or $ 3.75 per share, more than doubling from last year. Revenue increased 24% year over year to $ 7.16 billion.
The inevitable slowdown in subscriber growth was telegraphed by Netflix management in numerous reminders that the growth was a pandemic-induced anomaly.
Now that a large section of the population has been vaccinated, people can move around more freely and find other distractions besides watching TV series and movies on Netflix.
The big question is how much this year’s decline will be compared to the 37 million full-year increase in subscribers last year – by far the largest since Netflix expanded its DVD rental service to streaming video 14 years ago.
Third Bride analyst Scott Kessler speculated that the sluggish start this year could put pressure on Netflix management to make price changes or tweak its strategy to spur growth from one quarter to the next. “Or will the company continue to concentrate in the longer term?” Kessler asked himself.
Netflix management attempted to reassure investors in a letter saying that projected subscriber growth would improve in the second half of the year as more television series and films that had to be delayed during the pandemic are completed and released.
But what happened during the first quarter suggests that Netflix may be headed for a lackluster year. The last time Netflix started a year with lower earnings – 5.3 million subscribers in Q1 2017 – the service ended with an annual increase of 21.6 million subscribers.
Netflix management doesn’t make annual growth projections because it’s difficult enough to predict how many subscribers its service will add from one quarter to the next.
Not only is Netflix no longer benefiting from the fact that most people are stranded at home, it is facing more competition than ever from a wide range of video streaming services from big companies like Disney, Apple, and HBO.
However, with nearly 208 million subscribers worldwide, Netflix stays way ahead of the rest of the package. It also benefits from an award-winning string of shows, which still include popular series like “Stranger Things”, “The Crown” and “Ozark”. In a video factory that is said to be spending 17 billion US dollars, more and more potential hits are brewing together this year alone.
In its quarterly letter, Netflix said its success to date “strengthens our confidence and optimism for our next decade of challenge, growth and innovation.” The company also stressed that it doesn’t believe the intensifying competition has anything to do with slower subscriber growth.
Much of Netflix’s programs have been funded by debt, but the company no longer expects to have to borrow to pay those bills. Additionally, Netflix is now making more money than it burns, which it has rarely done best.
After a positive cash flow of $ 1.9 billion last year, Netflix expects to break even this year.
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