Netflix added a record 15.77 million paid subscribers in the first quarter of 2020, more than double its own forecast, compared to 9.60 million in the same quarter the previous year, taking its total to 182.86 million globally. Netflix stock is trading at a record high and the company is worth more than the Walt Disney Company.
The growth in the number of Netflix members accelerated from March, with people staying at home and seeking entertainment.
Speaking to analysts from what looked like a bedroom, Reed Hastings, the co-founder and chief executive of Netflix, said that everyone was wrestling with the implications of the coronavirus pandemic.
“It’s super hard to say if there’s strategic long-term implications because we’ve just been scrambling to keep our servers running well, keep the content, get our postproduction done. Our small contribution in these difficult times is to make home confinement a little more bearable.”
He was also suitably complimentary to the launch of Disney+. “Over 20 years of watching different businesses, incumbents, like Blockbuster and Walmart and all these companies, I’ve never seen such a good execution of the incumbent learning the new way and mastering it,” he said. “And then to have them achieve over 50 million in 6 months, it’s stunning. So to see both the execution and the numbers line up, my hats off to them.”
With other services also coming to market, competition will be intense. “I think it’s great, obviously, for the consumer to be able to have all these options,” he said. “There’s nothing we can do about any of them nor about video gaming nor about YouTube or any of the other competitors for time. So, what we do is just try to figure out how do we have the best service we can kind of steady every day, solid execution, and then we’ll get part of consumers’ viewing. No one’s going to get it all. And it’s working out very well for us.”
There were 2.31 million Netflix subscriber additions in the United States and Canada, significantly up on previous quarterly growth, with a total of 69.97 million. Average revenue per user was $13.09.
However, Netflix may be approaching saturation in America. If people who are confined to their homes have yet to subscribe to Netflix they may not be expected to do so subsequently.
The Europe, Middle East and Africa region saw the greatest growth, with 6.96 net additions, for a total of 58.73 million, with average revenue per use of $10.40.
In Asia Pacific the number of subscribers grew by 3.60 million, to 19.84 million, and in Latin America they rose by 2.90 million to 34.32 million.
That rate of growth is not expected to last, as governments are expected to ease restrictions related to the coronavirus pandemic. Netflix forecasts growth of 7.50 million subscribers globally in the second quarter of 2020.
While subscriber numbers grew, quarterly revenue rose less, as a result of the rise in the dollar against other currencies. Quarterly revenue rose to $5.77 billion, with net income of $709 million.
Total liabilities, including long-term debt of $14 billion, amount to $26.65 billion.
Almost all live action production has paused, which will start to restrict the release of new programming, although not for the next quarter. Netflix says it has continued to pay crews and has created at $100 million fund to provide support to the industry.
Netflix has been able to continue work on animations, through working from home, and remote postproduction has continued on over 200 projects. Writers rooms are operating virtually. Some language dubbing has been restricted but there are plans to increase support to enable voice artists to work from home.
Netflix tends to be working on shows well ahead of schedule, partly because it releases multiple episodes at once. Its 2020 slate of productions are largely shot and in postproduction.
Ted Sarandos, the chief content officer of Netflix, speaking from his kitchen, described it as “tough work” getting people doing work in new places. “So our productions, our postproductions, our offices are now distributed into people’s living rooms and bedrooms and kitchens around the world.”
Netflix has been expanding the scope of its productions, including unscripted programming that is closer to what people expect from television. “Our goal is that we want to make your favourite show,” he explained. “For some people, that’s big pedigree drama and for other people, that’s home improvement shows,” he said. “We want to make your favourite version of that.”