Pandemic and chill: Netflix adds nearly 16M subscribers

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This article was published 22/04/2020 (2090 days ago), so information in it may no longer be current.

The coronavirus outbreak has roiled much of the media and entertainment industry, but not the king of all streaming.

Netflix on Tuesday reported a record increase in subscribers as the Los Gatos company reaped the benefits of a massive increase in home viewing caused by stay-at-home measures intended to curb the spread of the coronavirus.

The company gained 15.8 million global subscribers, surging ahead of Wall Street’s expectations of 7.6 million. Netflix generated a net income of US$709 million or US$1.57 earnings per share, more than double from a year ago.

Revenue in the quarter rose 28 per cent to US$5.77 billion during the same period.

Analysts surveyed by FactSet had estimated Netflix would make US$5.75 billion in revenue and income of US$753 million in the first quarter.

Netflix had forecast it would add seven million global subscribers in the first quarter. The company had added 9.6 million global subscribers in the first quarter of 2019, its previous all-time quarterly high.

“While everyone in the media industry is hurting from COVID-19 and related economic impacts, Netflix currently is in much better shape to weather the storm than its competitors,” said Eric Haggstrom, a forecasting analyst with research firm eMarketer in a statement.

“With most of the US, Europe, and the rest of the world stuck at home, people are spending more time watching streaming video than ever before.”

Haggstrom said he believes even when household budgets shrink, Netflix will continue to do better than more expensive cable networks that lack live sports. Netflix also has an advantage over cheaper streaming services because its library is so vast, he said.

“Netflix is much better equipped for this new reality than competitors reliant on theatrical releases, theme parks, or live sports,” Haggstrom said.

More consumers are turning to streaming services as they shelter at home and look for ways to be entertained.

On the week of March 16, Americans streamed more than 156 billion minutes of content, up 36 per cent compared to three weeks before social-distancing restrictions were in place, according to Nielsen.

Netflix said it has seen an increase in demand as a result of people staying at home, but it expects viewing and membership growth to decelerate when home confinement ends.

“Like other home entertainment services, we’re seeing temporarily higher viewing and increased membership growth,” Netflix said in a shareholder letter.

Netflix continues to distribute some of the most talked-about shows, most recently streaming the docu-series Tiger King, which drew roughly 34 million people in the U.S. in its first 10 days, according to Nielsen.

Netflix stock has been on a huge upswing. The stock has risen more than 30 per cent from the start of the year to Monday, when the S&P 500 has declined about 13 per cent during that same time frame.

Now, Netflix, which does not offer any live sports and is solely focused on streaming, has a significant advantage compared to competitors like Disney Plus, analysts said.

The Walt Disney Co. is furloughing workers after it closed its popular theme parks, a key part of its business. Meanwhile, Netflix is adding to its staff. The company said it has hired 2,000 more workers to handle customer service.

“In this environment, it will be tough for Netflix competitors to go all out and put up a huge fight and grab their market share,” said Haris Anwar, a senior analyst with Investing.com, a site that tracks the financial markets. “That’s part of the reason that people are so bullish on Netflix.”

If the economy falls into a deep recession, however, some consumers could view paying for Netflix as a luxury. If Hollywood productions continue to be suspended, it could affect Netflix’s ability to entice audiences with new shows and movies.

Netflix stock was trading US$435.74, down about 0.4 per cent, in after hours trading.

— Los Angeles Times