OTT platforms like Netflix have been on a roll since the onset of the pandemic, witnessing unprecedented growth over the first two quarters of 2020. However, what goes up comes down, and Netflix’s Q3 report suggests that the happy times for the streaming service were not sustained for long.
In Q3 2020, Netflix only added 2.2 million users to its paid user base, compared to the expected 2.5 million. The number is way down from what Netflix recorded last year in the same period, i.e. 6. million. Netflix said, “We think this is primarily due to our record first-half results and the pull-forward effect we described in our April and July letters. In the first nine months of 2020, we added 28.1m paid memberships, which exceeds the the27.8m that we added for all of 2019. In these challenging times, we’re dedicated to serving our members.”
Although the addition of paid users has plateaued, Netflix says the retention of users remains active and engagement per member household has increased year over year in Q3 2020. As of September 30, the total paid user base of Netflix stands at 195.15 million.
Of the total additions this quarter, most of it comes from the Asia-Pacific (APAC) region. The APAC region contributed 46% of Q3 global paid net additions and the revenue in the region has increased 66% year over year.
For the upcoming Q4, the company has set a target for 6.0m paid net adds, shorter than what it achieved in Q4 2019 – 8.8 million.
Netflix says that COVID-19 has made the projections very uncertain and expects that things will go back to normal by in 2021. ” we expect paid net adds are likely to be down year over year in the first half of 2021 as compared to the big spike in paid net adds we experienced in the first half of 2020,” said Netflix.
The revenue collection of Netflix continues to grow. It has posted a revenue of $6.44 billion, up 22.7% and an operating income of $1.32 billion. But it could not do much to boost its profits, which remain lower than expected. The company earned $1.74 in per-share profit off of the net income of $790 million, compared to the expected $2.13 in earnings per share and net income of around $954 million.
During the pandemic, the user base numbers kept going up, as more and more people turned to OTT platforms. However, Netflix was not able to produce new content for its platform due to the social distancing norms. But the easing-off of the social distancing norms across the globe has opened the door for Netflix to continue producing various shows and movies.
Netflix has already completed shooting more than 50 productions since mid-March. Stranger Things Season 4 and The Witcher season 2 have resumed shooting as well. The company plans to produce 150 more productions by the end of 2020. It also expects to launch more productions in each quarter of 2021 than this year.
“We’re confident that we’ll have an exciting range of programming for our members, particularly relative to other entertainment service options,” said Netflix.