Netflix subscriber growth slow, reveals US$17bil in content spending in 2021


The US$21bil spending is a notable uptick from the streamer's 2020 spend of $11.8 billion, as the pandemic prompted production delays across the industry, and a 2019 content spend of $13.9 billion.

Netflix Inc said slower production of TV shows and movies during the pandemic hurt subscriber growth in the first quarter, sending shares of the world's largest streaming service down 11% on Tuesday.

Roughly 3.98 million people signed up for Netflix from January through March, below the 6.25 million average projection of analysts surveyed by Refinitiv.

Netflix estimated it will add just 1 million new streaming customers in the second quarter. Analysts had expected a forecast of nearly 4.8 million.

Shares of Netflix sunk 11% in after-hours trading to $489.28, wiping $25 billion off the company's market capitalization. Its stock has risen 27% over the past 12 months compared with a 63% increase in the tech-heavy Nasdaq Composite Index.

Netflix said it did not believe competition changed materially in the quarter or impacted its new sign-ups "as the over-forecast was across all of our regions."

The company projected membership growth would accelerate in the second half of the year when it releases new seasons of "You," "Money Heist," and "The Witcher" and action movie "Red Notice," among other titles.

A year ago, Netflix added a record 15.8 million customers as the pandemic forced people around the world to stay home. The company said on Tuesday the pandemic hindered filming new shows.

"These dynamics are also contributing to a lighter content slate in the first half of 2021, and hence, we believe slower membership growth," the company said in its quarterly letter to shareholders.

Analysts project people will spend less time streaming from their living rooms as COVID-19 vaccinations spread and more people emerge from their homes.

Rival media companies have declared streaming their priority and are spending billions to compete with Netflix. Walt Disney Co's Disney+ crossed 100 million subscribers in March. Netflix's total streaming customers stood at 207.6 million at the end of March.

Netflix said it did not believe competition changed materially in the quarter or impacted its new sign-ups "as the over-forecast was across all of our regions."

Netflix's share of new U.S. subscribers fell to 8.5% during the quarter, down from 16.2% the same period a year ago, according to Kantar Media.

During the quarter, Netflix lost one of its most popular titles when workplace comedy "The Office" moved to Comcast Corp streaming service Peacock.

Netflix also raised its monthly rates in Britain, Germany, Argentina and Japan during the quarter.

New customers totaled 1.8 million in Europe, 1.36 million in Asia and 360,000 in Latin America.

"What wasn't expected was the strength of the slowdown in international markets, where competition is significantly lower," said eMarketer analyst Eric Haggstrom.

Excluding items, the company earned $3.75 per share in the first quarter, beating analyst estimates of $2.97 per share.

Revenue rose to $7.16 billion from $5.77 billion during the quarter, edging past estimates of $7.13 billion.

Net income rose to $1.71 billion, or $3.75 per share, from $709 million, or $1.57 per share, a year earlier.

Netflix also revealed that it will spend over US$17 billion on content this year, according to its first-quarter earnings report.

"As we've noted previously, the production delays from Covid-19 in 2020 will lead to a 2021 slate that is more heavily second half weighted with a large number of returning franchises," said the company in its letter to shareholders.

"And while the roll out of vaccines is very uneven across the world, we are back up and producing safely in every major market, with the exception of Brazil and India. Assuming this continues, we'll spend over $17 billion in cash on content this year and we'll continue to deliver an amazing range of titles for our members with more originals this year than last."

That's a notable uptick from the streamer's 2020 spend of $11.8 billion, as the pandemic prompted production delays across the industry, and a 2019 content spend of $13.9 billion.

During the first quarter, Netflix's most-watched shows included the first season of "Firefly Lane," with 49 million households tuning in during the series' first 28 days on the service, Season 3 of "Cobra Kai" (45 million),"Fate: The Winx Saga" (57 million) and "Ginny & Georgia" (52 million), according to the company.

On the film side, Netflix members gravitated toward "Outside the Wire" (66 million),"Yes Day" (62 million),"I Care a Lot" (56 million), and the last movie in the "To All the Boys I've Loved Before" trilogy (51 million).

As the streamer invests in local-language original productions, it noted that "Who Killed Sara?" from Mexico drew in an estimated 55 million viewers in its first four weeks on the service, making it Netflix's most popular non-English title ever in the U.S. during that time frame. Spain's "Below Zero" brought in 47 million households and Korea's "Space Sweepers" attracted 26 million viewer households.

Netflix also spotlighted its popular French heist series "Lupin," starring Omar Sy, which drew 76 million member households in its first 28 days on the platform -- its most popular new title this quarter.

Earlier in the month, Netflix revealed to Variety exclusively that its Oscar-nominated series, including "A Love Song for Latasha," "Da 5 Bloods," "Pieces of a Woman," and "Mank," each got a significant viewership bump following the announcement of the nominees.

Though streamer beat Wall Street's earnings and revenue projections, it missed its own Q1 subscriber targets, with a gain of nearly 4 million paying households during the period, significantly below guidance for a bump of 6 million, sending the stock down around 11% in after-hours trading Tuesday.

- Reuters

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