Netflix adds over 15 million subscribers, warns of decline after lockdown boom

Hemai Sheth | | Updated on: Apr 22, 2020

Netflix has added 15.8 million subscribers in the first quarter more than double the expected number of 7.2 million, according to its recent filings.

Netflix now has 182 million subscribers across the globe. The media giant also reported quarterly revenue of $5.77 billion up from the $5.76 billion as estimated.

However, the increase in numbers is led by global shutdowns owing to the coronavirus pandemic. The OTT giant has warned of a “tough road ahead” as its productions have been temporarily paused. Furthermore, the rise in numbers will not last once the lockdown ends, it had said.

“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. Like other home entertainment services, we’re seeing temporarily higher viewing and increased membership growth. In our case, this is offset by a sharply stronger US dollar, depressing our international revenue, resulting in revenue-as-forecast. We expect viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon,” Netflix said in a letter to its investors.

Dollar impacts revenues

Apart from the increased membership owing to the crisis, Netflix’s financial performance has also been impacted due to the dollar rising sharply and its production shutdown.

‘When it comes to production, almost all filming has now been stopped globally, with the exception of a few countries like Korea and Iceland,” Netflix said.

“With our productions currently paused, this will shift out some cash spending on content to future years. As a result, we’re now expecting 2020 FCF of -$1 billion or better (compared with our prior 2020 expectation of -$2.5 billion and -$3.3 billion actual in 2019),” it further said.

However, Netflix currently has a significant library of original content in the pipeline for it to last through 2021.

“While our productions are largely paused around the world, we benefit from a large pipeline of content that was either complete and ready for launch or in post-production when filming stopped,” the letter read.

“So, 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.”

Published on April 22, 2020
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