Netflix added more than double the number of expected subscribers in the first three months of the year, massive growth that many will take as a bellwether for how subscription streaming video will fare during the coronavirus pandemic.
The world’s dominant streaming-video subscription service, operating basically everywhere except China, Netflix said subscribers grew by 15.77 million to 182.86 million total, according to the company’s first-quarter results. Netflix reported earnings on Tuesday afternoon.
The performance soars past Netflix’s January guidance of 7 million new members. Analysts on average had expected 7.5 million member additions, according to Thomson Reuters.
Netflix’s latest numbers come as streaming video has come to represent one of the few boom sectors of the economy with people the world over trapped at home. The coronavirus, which causes the respiratory disease known as COVID-19, has overwhelmed health care systems, triggered quarantines and stay-at-home orders, and forced entire industries to shut down. Entertainment has been no exception: Movie theaters are shuttered; big-budget films are being pushed back to next year; nobody knows when sports, concerts and theater can resume; and new film and TV productions are on hold for the foreseeable future.
With an eye-popping slate of original content and a stream-at-home model, Netflix is ideally positioned to keep serving up new programming to people stuck at home and desperate for entertainment.
“At Netflix, we’re acutely aware that we are fortunate to have a service that is even more meaningful to people confined at home, and which we can operate remotely with minimal disruption in the short to medium term,” the company said, adding that it’s seeing temporarily higher viewing and increased membership growth.
“We expect viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon,” it added.
A new normal
In the midst of the soaring demand, Netflix said it has been dealing with “significant disruption” in customer support during the spike in demand, which it has been able to cope with by adding 2,000 work-from-home customer service agents. It also has had to ratchet back some of its alternate-language dubbing.
But content production has essentially ground to a halt. “Almost all filming has now been stopped globally, with the exception of a few countries like Korea and Iceland,” Netflix said. The company has been able to move more than 200 projects in post-production to be continued remotely. And some of its production teams can produce new work remotely as well. Within two weeks of the shelter-in-place orders in Los Angeles, most of Netflix’s animation production team was back up and running, working from home.
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Still, the company expects to release all of its originally planned shows and films in the first half of the year. It is also acquiring already completed projects elsewhere, like its recent deal to stream indie comedy The Lovebirds starring Issa Rae and Kumail Nanjiani and a Sherlock Holmes spinoff movie, Enola Holmes, starring Millie Bobbie Brown.
“While we’re certainly impacted by the global production pause, we expect to continue to be able to provide a terrific variety of new titles throughout 2020 and 2021,” Netflix said.
Among the programs in the first three months of the year that Netflix bragged about for their viewership:
Original film Spenser Confidential was watched by 85 million households in its first four weeks
Season four of Spanish language thriller series La Casa de Papel, or Money Heist, is projected to hit 65 million households in its first four weeks
Docu-series Tiger King was watched by 64 million in its first four weeks
Cringe-inducing dating competition Love Is Blind was watched by 30 million in its first four weeks
Ozark’s season three is projected to be watched by 29 million in its first four weeks
Netflix counts a title as “watched” if you choose to watch it and let it play for two minutes; its viewership stats aren’t independently verified.
Shares were up 3.5 percent at $449.11 after hours. Through the close, Netflix stock, unlike most of the market, is up more by more than a third so far this year.
The news also comes in the midst of the streaming wars, a seven-month window when media and tech giants are rolling out waves of new services. Chief among the upstarts has been Disney Plus, which launched Nov. 12 and has quickly ramped up to 50 million subscriber in five months. The winners of the streaming wars will not only shape the future of TV in the streaming age, but also influence how many services you have to pay for to watch your favorite shows and movies.
In the US and Canada, its biggest single region, Netflix added 2.3 million streaming customers, for a total of nearly 70 million. In Europe, Middle East and Africa, it added 6.96 million new members, hitting 58.73 million total. In Latin America, its new members increased 2.9 million to 34.32 million. And in the Asia Pacific region, new subscribers increased 3.6 million to 19.84 million.
Looking ahead to the second quarter, Netflix expects to add 7.5 million streaming members overall. Analysts’ consensus estimate was for Netflix to predict 4.2 million.
Netflix also predicted $1.81 per share in earnings in the second quarter. On average, Wall Street analysts who track Netflix expect $1.54.
Overall, Netflix reported a profit of $709.1 million, or $1.57 a share, compared with $344.1 million, or 76 cents a share, a year earlier. Revenue climbed 28% percent to $5.77 billion.
Analysts on average expected per-share profit of $1.65 — compared with Netflix’s guidance for $1.65 — and $5.762 billion in revenue.
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