Coronavirus throws up more positives than negatives for Netflix

Netflix also said it generated revenue of $5.77 billion for the first quarter, up from $4.52bn a year earlier.

Netflix has announced it added more than 15.7 million subscribers in the first three months of 2020, around the time the coronavirus outbreak (Covid-19) became a pandemic and saw countries go into lockdown.

In its first quarter of 2020 earnings announcement on Tuesday, it revealed it added 2.3m subscribers in the United States and Canada in the first quarter, making a total of 69.9m. Globally, 13.5m subscribed to its platform.

Netflix also said it generated revenue of $5.77 billion for the first quarter, up from $4.52bn a year earlier, but below analyst forecasts of $5.75bn. Profits rose to $709.1m from $344.1m in 2019.

This is positive news for the streaming platform after it increased its marketing and content spend in the final quarter of the financial year of 2019.

Its move to prioritize international marketing over its domestic campaigns also paid off, as more than 29m households tuned into the third season of Ozark, a crime drama starring Jason Bateman.

The reality show Love Is Blind saw 30m subscribers tuned in, while Tiger King, a documentary series about a tiger breeder and zookeeper in Oklahoma who landed in prison, drew 64m subscribers.

However, during these uncertain times, Netflix and its rivals (including traditional broadcasters) are not immune to the current challenges of filming new shows, due to social distancing and stay at home rules.

Netflix also said the increase in subscribers and viewing hours put pressure on Internet capabilities in some parts of the world during the quarter and, as a result, Netflix reduced bandwidth in Australia, Mexico, India and many other countries following requests from local governments.

The company also added 2,000 remote agents to handle the surge in customer calls due to increased demand for content, after it saw “significant disruption when it comes to customer support and content production.”

Netflix said while it has fared well during Covid-19 so far, the company expected “viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon.”

It added it expected to see lesser growth in the current quarter, which ends in June. The company has forecast 7.5 million new subscribers and about $6 billion in sales and $820 million in profit.

“We have never seen a future more uncertain or unsettling. The coronavirus has reached every corner of the world and, in the absence of a widespread treatment or vaccine, no one knows how or when this terrible crisis will end,” Netflix said in its letters to its shareholders.

Paolo Pescatore, a technology, media and telecoms analyst at PP Foresight told The Drum Covid-19 would have a knock-on effect on all video subscription players later in the year.

Even though Disney Plus has already racked up over 50m subscribers, Comcast launched Peacock last week to more than 15m subscribers and HBO Max will roll out on May 27, he said Netflix should fare much better with its broad catalogue.

This is because Comcast said most of the original shows that were due to headline the launch of Peacock will not be ready until 2021, while WarnerMedia has announced the reunion of the cast of Friends won’t be released until the summer or fall.

“So far, the company has weathered the storm and has not seen a significant dent with the arrival of new entrants. Netflix remains a dominant force in entertaining users, but spiralling costs remain an ongoing concern,” he added.

“Unsurprising, engagement is going through the roof and will proliferate over the coming months. Expect to see users think twice about how much they spend with their current TV provider and may cut back/substitute in preference for online video streaming services. “

However, production on all movie and television content has been shut down for a period now and there is no date set for work to resume. While the shutdown will only have a modest impact on new content for the next three months, Netflix said it could become a major problem if producers and actors remain on the sidelines.

It is rushing to finish shows that are in final edits and is aggressively acquiring content from third-party suppliers.

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