The demand for online entertainment increased when the world went on lockdown earlier this year. But how does Netflix fare after that initial boost?
1. Growth is slowing – even more than Netflix expected
According to its latest findings, Netflix added just 2.2 million new subscribers in the three months to September 30, as the surge in demand for its services caused by the pandemic subsided.
While he warned that a slowdown was likely, the final figure was lower than his July forecast of 2.5 million, causing the company’s shares to fall 5% in after-hours trading.
“The streaming pandemic is over,” said Paolo Pescatore, analyst at PP Foresight.
Nonetheless, Netflix reminded investors that it is still on track for a record 34 million new subscribers in 2020 – more than 200 million in total.
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2. The Old Guard, an action film starring Charlize Theron, was the Netflix hit of the quarter.
Netflix said 78 million member households watched The Old Guard, a Netflix original, in the first four weeks after launch, making it the company’s most popular title of the quarter.
Enola Holmes, Project Power and The Kissing Booth 2 were also popular, attracting 76 million, 75 million and 66 million households in the first four weeks of their debut.
Of course, these numbers should be taken with a grain of salt – Netflix counts any viewing time over two minutes in its tally. And the viewer numbers he shares are focused on his own original productions.
3. Markets outside the United States are absolutely critical to the business
The number of international Netflix subscribers had already eclipsed those in the United States – and growth abroad continues to be critical.
In the most recent quarter, the strongest growth in subscriber numbers occurred in its Asia-Pacific region, which had more than one million new subscribers – almost half of registrations. The firm has boasted of now claiming memberships in a “double-digit” share of broadband connected homes in Japan and South Korea.
But the company still achieves the most revenue per user in the United States, so retention in its home market is critical, especially as competition from rivals like Disney and HBO intensifies.
On this point, Netflix has sought to reassure investors, writing in its quarterly update that “retention remains healthy and engagement per member household has risen sharply” from last year.
4. Now the race is on for more content
The shutdown of film and television productions, forced by lockdowns this spring, has focused on how Netflix and its competitors will get their hands on new offerings to retain their members.
Netflix played down those concerns, saying it is making good and cautious progress in production and expects the number of Netflix productions launching next year to exceed 2020 every quarter.
Netflix is expected to profit from the struggles of cinema operators, said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown. But as the home-confined public burn equipment faster, costs will rise – and could push the company to raise prices, she warned.
“Original content can keep customers coming back, but it costs a pretty penny and is downright macabre for the bottom line,” she said. “If consumers are expected to burn content at a faster rate, the cash hole will theoretically get bigger.”
5. The slowdown in production helped his profits
The company reported a record quarterly profit of $ 790 million as revenue rose more than expected to $ 6.4 billion, in part due to the appreciation of the euro against the dollar.
And the company said its profit margins improved as well, due to the temporary slowdown in production.