Netflix growth slows

Photo by Thibault PeninNetflix was considered one of the big winners of the Corona crisis. In the midst of the pandemic, the video service gained more new subscribers last year than ever before in its history. By the end of 2020, it had more than 200 million paying customers for the first time. But there have been signs in the meantime that the surge in new customers is anticipating future demand and a Corona hangover is coming for the company.

This has now been confirmed in the first quarter, and to an even greater extent than feared: With its figures presented on Tuesday after the close of the stock exchange, Netflix has caused a bitter disappointment. In the past three months, only just under four million additional subscribers were added, two million less than the company had predicted in January.

In the first quarter of 2020, when the pandemic was picking up steam, there were nearly 16 million new subscribers. For the second quarter of 21, Netflix predicts even further slowdown and expects only one million more subscribers, which was well below analysts' expectations. The company's share price lost more than ten percent at times in after-hours trading.

Netflix itself blamed early demand for the slower growth in subscriber numbers. In addition, the company also cited the comparatively low supply of new movies and TV shows due to pandemic-related production interruptions. This effect will be felt throughout the first half of the year, it said. In the second half of the year, however, there will be a much greater supply of new content, and production is now underway again almost everywhere in the world. For this reason, the company is also hopeful that it will only experience a temporary dip and that it will be able to report faster growth in customer numbers again in the second half of the year.

Admittedly, the slowdown also comes at a time when Netflix is facing considerably stronger competition. Foremost among them is Disney+, the video platform of entertainment conglomerate Walt Disney, which has gained more than 100 million subscribers since its launch just under a year and a half ago, already half as many as Netflix has. Disney has thus far exceeded its expectations; originally, the company had not envisioned reaching this mark until after 2024. In addition, there are a number of other new competitors, such as the HBO Max platform, which belongs to the telecommunications group AT&T and was launched just under a year ago.

Netflix, on the other hand, explicitly says in its quarterly report that the more intense competition is not a major reason for its own slowed growth. As an indication of this, the company says that subscriber numbers have developed similarly in all regions of the world, even where competition is less intense. Nevertheless, analyst Eric Haggstrom of market research group Emarketer sees the Netflix figures as a cause for concern, especially in view of the competition - and as a possible indication that the company is approaching a saturation point in its important American market.



Photo by Thibault Penin

 


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