Netflix adds millions more users but revenue hasn’t climbed much

As you might be able to guess, Netflix saw a surge in subscriptions when lockdown measures were put in place by countries due to the COVID-19 pandemic.

As great as that is Netflix isn’t counting its laurels yet according to the firm’s financial results for Q1 2020.

“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 shareholders.

Netflix explains that user growth for January and Feburary were comparable to the growth in 2019 and 2018. When March came around “many more households” joined Netflix. The firm doesn’t declare just how many more were added in that month.

For the quarter however we can report that Netflix now boasts 182.86 million subscribers globally. That represents a 22.8 percent climb from the same period last year.

This is also much higher than the 174.09 million subscribers Netflix forecasted in Q4 2019.

Looking at revenue it’s clear that the dollar being stronger really isn’t helping Netflix’s bottomline internationally. Revenue for Q1 2020 came in at $5.76 billion, a 27.6 percent increase year-on-year. However, that figure is less than one percent higher than the forecasted revenue for the quarter.

“Partially due to the crisis, the US dollar has appreciated significantly, which creates a drag on international revenue growth. As an example, the price for our standard plan in Brazil is R$33, which used to be $8.5 last year but now is $6.5 based on April 2020 F/X rates, so we have a ~25% decline in US dollar average subscription price from Brazil, which offsets strong membership growth,” explained Netflix.

Are you still watching?

As one might expect, production on Netflix content has ceased given the pandemic and lockdown orders around the world.

Netflix says that a number of its teams are operating remotely including animators and series writers but a lot of work simply cannot be done, such as language dubbing.

“We’ve paused most of our productions across the world in response to government lockdowns and guidance from local public health officials. In Q2, there is only a modest impact on our new releases, which is primarily language dubbing. No one knows how long it will be until we can safely restart physical production in various countries, and, once we can, what international travel will be possible, and how negotiations for various resources (e.g., talent, stages, and post-production) will play out,” said Netflix.

The firm goes on to say that it’s competitors are in a similar boat but the does an about face and says its in a better position because of the large library it has.

“Our member satisfaction may be less impacted than our peers’ by a shortage of new content, but it will take time to tell,” the firm said.

Time will tell indeed.

We’re curious to see how much lockdown has increased subscribers by but we’ll likely only see that data next quarter.

[Source – Netflix]


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