With millions of people opting for internet entertainment while stuck at home due to the coronavirus pandemic, Netflix gained about 15.77 million new users in the first quarter of 2020.
The recorded growth doubled the initial growth prediction of the company, as it had earlier forecasted 7 million net new subscribers growth for Q1 before the virus outbreak.
With the addition of the new subscribers, Netflix now has a total of 182.86 million paid subscribers.
Over $5 Billion in Revenue
Netflix also reported a total revenue of $5.77 billion in Q1. The company revealed that the dollar rising sharply reduced its international revenue. It also added that the shutting down of production due to the pandemic delayed cash spending, which consequently increased cash flow.
First, our membership growth has temporarily accelerated due to home confinement. Second, our international revenue will be less than previously forecast due to the dollar rising sharply. Third, due to the production shutdown, some cash spending on content will be delayed, improving our free cash flow, and some title releases will be delayed, typically by a quarter.Extract Netflix letter to investtors
The company also disclosed that it’s earning per share stood at $1.57.
Q2 growth prediction
Currently, Netflix is viewing the huge spike of new users in Q1 as short term. The company is forecasting an addition of just 7.5 million net users globally in Q2, as it is expecting growth to decline as governments lift lockdowns.
However, in Nigeria for instance where the spread of the virus has not reached its peak and is increasing exponentially daily, the growth of new users on the platform may continue to increase as the growing number shows that the lockdown may not be lifted soon.
Talking about the post-COVID effect of Netflix growth, CEO Reed Hastings expressed that it was hard to say but emphasized that internet entertainment be more and more important in the next five years
“We don’t use the words ‘guess’ and ‘guesswork’ lightly,” he said. “We use them because it’s a bunch of us feeling the wind, and it’s hard to say. But again, will internet entertainment be more and more more important in the next five years? Nothing’s changed in that.”
Reed Hastings, CEO Netflix
The company has also revealed that the global halt to movie and TV production might affect content plans on the platform. However, it has said the impact on Q2 will be “modest”.
“No one knows how long it will be until we can safely restart physical production in various countries, and, once we can, what international travel will be possible, and how negotiations for various resources (e.g., talent, stages, and post-production) will play out,” the investor letter said
Effect of COVID-19 on production
Like every other company, the pandemic has dramatically affected the work process of Netflix. According to Chief Content Officer, Ted Sarandos, the company now runs production and post-production remotely.
“Our productions, our post-productions, our offices are now distributed into people’s living rooms and bedrooms and kitchens around the world,” Mr Sarandos said. “It’s just an incredible testimony to the innovation that literally within a few hours, but certainly within a few days of the shutdowns, we had production up and running remotely, post-production up and running remotely, animation up and running remotely, pitch meetings happening virtually, writers rooms assembling virtually.”
Netflix’ earning report for Q1 shows that the company has benefited hugely from the current pandemic. The huge increase in usage and revenue shows that more people are opting for Netflix as a go-to platform for entertainment while stuck at home.
Although Netflix is predicting a drop in growth with government lifting lockdown, the popularity and familiarity the crisis has created for the platform may see the growth rate increase even after COVID-19.