Record high Netflix subscriptions in coronavirus crisis
The coronavirus outbreak has roiled much of the media and entertainment industries, but not the king of all streaming.
Netflix on Tuesday reported a record increase in subscribers as the Los Gatos, Calif., 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. It now has a total of 183 million customers.
Netflix generated a net income of $709 million or $1.57 earnings per share in its first quarter, more than double from a year earlier. Revenue during the same period rose 28% to $5.77 billion.
Analysts surveyed by FactSet had estimated $5.75 billion in revenue and income of $753 million 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 — and had forecast it would add 7 million global subscribers in the first quarter of this year.
“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,” Eric Haggstrom, an analyst with research firm EMarketer, said in a statement. “With most of the U.S., Europe, and the rest of the world stuck at home, people are spending more time watching streaming video than ever before.”
As more consumers choose to stay at home to avoid the coronavirus, services that deliver home entertainment and food could see a financial boost, experts say.
During the week of March 16, Americans streamed more than 156 billion minutes of content, up 36% compared with three weeks earlier, before the social distancing restrictions took effect, according to Nielsen.
Netflix said that 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.
“Our small contribution in these difficult times is to make home confinement a little more bearable,” said Reed Hastings, Netflix’s CEO, said in a video presentation for investors.
Ted Sarandos, Netflix’s chief content officer, added that the 2020 slate of series and films have been largely shot and are in post-production. He said Netflix is “pretty deep” into its 2021 slate and is shooting some projects in Iceland and South Korea, “taking those key learnings and applying them to plans for productions around the
world.”
Highly-anticipated programs such as the fourth season of “The Crown” will be released as planned. “We don’t anticipate moving things around,” Sarandos said.
Netflix continues to distribute some of the most talked-about shows, including the docuseries “Tiger King,” which drew 64 million households and unscripted dating show “Love is Blind,” which pulled in 30 million households during its first four weeks. Netflix counted households that watched at least two minutes of the programs.
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The pandemic has helped to change the narrative for Netflix from last year, when the number of U.S. subscribers declined after the streamer raised its prices. Some analysts at the time were concerned about whether Netflix would be able to keep up its growth trajectory as new competitors such as Disney+ and Apple TV+ entered the market.
The company that defined the concept of binge watching has continued to reinvent itself. But as Disney, Apple and others enter the streaming business, Netflix faces the biggest challenge in its history.
Now, Netflix, which does not offer any live sports, has a significant advantage compared with competitorssuch as Disney, analysts said. 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 and 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.
If the economy falls into a deep recession, however, some consumers could view paying for Netflix as a luxury. Netflix’s ability to entice audiences with new shows and movies could be hampered if Hollywood productions continue to be suspended.
The company has committed $150 million to supporting the industry and says it has been able to keep some of its work going amid the coronavirus crisis.
Netflix’s animation team is working from home and was back up and running within two weeks of the shelter-in-place orders in L.A. It also has been able to keep more than 200 post-production projects going remotely, the company said.
“The impact on us is less cash spending this year as some content projects are pushed out,” Netflix said.
With Hollywood on hold, so are the livelihoods of thousands of workers who depend on the film and TV business that has halted during the coronavirus pandemic.
Netflix stock has mushroomed more than 30% this year, as the Standard & Poor’s 500 index has declined about 13%. The stock closed Tuesday at $433.83 a share, down 0.8%.
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