Netflix is in a unique position and is among the companies that are benefiting from the global pandemic, which has kept several people at home with nothing to do but stream movies from Monday to Monday. But the question is how long can it last?
Although much of Netflix’s recent boom didn’t start until mid-March, when more people were forced to stay home to help curb the spread of the COVID-19, a series of popular, original shows and movies helped Netflix boost subscribers in its first quarter. Netflix added 15.8 million subscribers, more than double the 7.2 million that was expected — a growth of more than 22 percent year over year. Netflix now has 182 million subscribers worldwide. The company also saw quarterly revenue of $5.77 billion versus the $5.76 billion estimated.
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Netflix’s opening letter to shareholders isn’t all good. The letter notes that “some of the lockdown growth will turn out to be pull-forward from the multi-year organic growth trend, resulting in slower growth after the lockdown is lifted country-by-country.” The letter adds that executives expect “viewing to decline and membership growth to decelerate as home confinement ends, which we hope is soon.” Part of the letter reads;
“At Netflix, we’re acutely aware that we are fortunate to have a service that is even more meaningful to people confined at home, and which we can operate remotely with minimal disruption in the short to medium term, Like other home entertainment services, we’re seeing temporarily higher viewing and increased membership growth. In our case, this is offset by a sharply stronger US dollar, depressing our international revenue, resulting in revenue-as-forecast. Netflix is taking extra precautions right now in an uncertain time, including temporarily reduced the number of product innovations we try.”
But will Netflix Continue releasing Shows?
“While our productions are largely paused around the world, we benefit from a large pipeline of content that was either complete and ready for launch or in post-production when filming stopped,” the letter reads. “So, while we’re certainly impacted by the global production pause, we expect to continue to be able to provide a terrific variety of new titles throughout 2020 and 2021.”
A consistent stream of new originals gives Netflix a leg up over other streaming services. One of the biggest advantages Netflix has over its competitors’ ties directly into its release strategy; because full seasons of shows are available at once, Netflix has to have full seasons ready to go. That means TV shows it has in the pipeline for May, June, and July are fully complete seasons, so Netflix doesn’t have to worry about filming more episodes like networks do.
“Our content competitors and suppliers will be impacted about as much as we are, in terms of new titles,” the letter to shareholders reads. “Since we have a large library with thousands of titles for viewing and very strong recommendations, our member satisfaction may be less impacted than our peers’ by a shortage of new content, but it will take time to tell.”
The longer that Netflix has a captive audience because of the coronavirus pandemic, and as long as Netflix can continue serving new content, the company will continue to have a major advantage.
