In 2020, Netflix credited the coronavirus pandemic with delivering record growth. It seems the tables have now turned and it’s blaming the pandemic for the worst first quarter in eight years. The number of new customers added for the first three months of 2021 was less than Wall Street’s expectations and on top of that missing its own forecast by millions of subscribers.
And the current quarter will be more challenging, Netflix said Tuesday, predicting a gain of just 1 million new customers — or a fraction of the 4.44 million projected by analysts. The dismal growth sent shares plunging as much as 13%. Netflix shares were down 8% in pre-market trading on Wednesday.
The on-demand streaming company has been warning for months that there would be a slow growth after customers emerged from their Covid-19 lockdowns. In the first quarter of 2020, Netflix had its strongest quarter in its history, adding 15.8 million new customers, and Netflix’s pace was still brisk in the fourth quarter.
Netflix added 3.98 million subscribers in the first quarter, compared with an average analyst estimate of 6.29 million and its own forecast of 6 million. That marked the weakest start of a year since 2013, when Netflix added about 3 million customers.
Netflix blamed a “Covid-19 pull-forward” effect, meaning the pandemic accelerated its growth in 2020 while everyone was stuck at home and needed something to watch. Now that surge is taking a toll on the company’s 2021 results.
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A lack of new shows also contributed to the slump, the company said. While there were popular hits available, like “Bridgerton” and “Cobra Kai,” fresh releases tailed off after mid-January, and growth faltered.
The pandemic has pushed the release of many of the company’s key titles into the back half of this year. Production was interrupted in 2020 due to fallout from the pandemic.
Netflix rejected the idea that competition factored into its results, noting that its growth slowed globally — not just in the crowded U.S. streaming market. Disney+, HBO Max, and Peacock don’t yet compete with Netflix in many parts of the world.
The company’s answer to the challenges remains the same as ever: produce more shows. Netflix plans to spend $17 billion in cash on programming this year, up from $12.5 billion last year and $14.8 billion in 2019. It’s prioritizing investments in programming outside the U.S., where most of its new customers live.
After years of borrowing to fund production, Netflix has said it no longer needs to raise outside financing to fund day-to-day operations. The company plans to reduce debt and will buy back up to $5 billion of shares.
