Staying home and watching your favorite films and shows with a bowl of popcorn on your lap while there is a pandemic outside – does that sound like how you spent most of your time in 2020? Well, you are not alone. With the pandemic raging across the globe and forcing people to stay at home, most turned to streaming platforms for their daily dose of entertainment, titles with their close ones. And the king of streaming platforms-Netflix was a prime example of this phenomena. The company witnessed record growth in 2020, adding 15.8 million new users.
Now, with the production of new and existing titles halted for most of 2020, it has become a bane for Netflix, whose shares took a massive plunge after paid subscriptions came at a meagre 3.98 million from January to March, well below the 6.25 million average projection of analysts surveyed by Refinitiv. This is the weakest start of a year for Netflix since 2013. It ended the first quarter of the year with 207.64 million streaming subscribers across the world.
In a press release, executives blamed a big “COVID-19” pull forward in 2020, implying that the unprecedented growth last year was now slowing down. “It really boils down to Covid,” Spencer Neumann, the company’s chief financial officer, said.
“We had those 10 years where we were growing smooth as silk,” Executive Chairman and co-Chief Executive Officer Reed Hastings said. “It’s a little wobbly right now.”
Another factor behind this fall was the lack of new shows and films since production was halted to stem the spread of the virus. While the screening of existing shows carried Netflix through the first half, the slump came since there was nothing new to watch this quarter. It is estimated that about another million streaming customers will be added by Netflix in the second quarter.
“These dynamics are also contributing to a lighter content slate in the first half of 2021, and hence, we believe slower membership growth,” Netflix said in its quarterly letter to shareholders. Since people are now emerging from their homes and resuming work/education, their time to watch films and shows is decreasing.
Netflix refused to consider the notion that competition by rival streaming services like HBO Max and Disney Plus had hindered its growth, saying that its competition had not changed materially in the quarter or impacted its new sign-ups “as the over-forecast was across all of our regions.”
Does this discourage Netflix? Not at all! It plans to increase its expenditure on programming (mainly outside the US) from $12.5 billion in 2020 to $17 billion. With the release of new seasons of existing shows like “The Witcher” and “You”, it expects its membership to grow. And so do we!