Netflix Falls After Pandemic Boom Fails to Attract New Subscribers
At the start of the pandemic, Netflix credited the crisis to its historic growth in 2020. However, it appears that the tables have turned, and the streaming service now lays blame on the same pandemic for its worst performing quarter in eight years.
In the first three months of 2021, Netflix added significantly fewer new customers compared to Wall Street expectations, even failing to meet its own forecast by millions of users. However, the upcoming quarter is slated to be even more difficult, as Netflix predicts an increase of only 1 million new subscribers — barely meeting the 4.44 million forecast by analysts. As a result of the poorer-than expected performance, Netflix shares were sent falling by more than 10%.
In the first three months of 2021, Netflix’s customer base increased by only 3.98 million, considerably lower than the 6.29 million consensus among Wall Street analysts, and its own projections of 6 million. The latest earnings mark the most sluggish first quarter since 2013, when the streaming service added approximately 3 million new subscribers. Netflix laid blame on a “Covid-19 pull-forward” effect, as the pandemic sharply increased growth in 2020, when consumers were subject to stay-at-home orders and were in need of entertainment.
Now, last year’s surge is having a negative effect on the company’s latest financial results. The absence of new shows also added to the downturn, as releases declined amid ongoing Covid-19 restrictions. In the meantime, Netflix shot down the idea that increased competition was a contributing factor to the dismal earnings— noting that new customer growth slowed down around the globe— not just in the saturated US streaming market.
Going forward, Netflix said it plans to address its growth challenges by— you guessed it— making more new shows. The company plans to allocate up to $17 billion on programming in 2021, up from $12.5 billion in the previous year, and $14.8 billion in 2019. The streaming platform noted that it would heavily focus on programming investments overseas, where the majority of its new users reside.
Information for this briefing was found via Netflix. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
