Big disappointment for Netflix

The video service has a corona hangover: the number of customers is growing less than hoped – and the streaming business could weaken even further.

Not as bright as expected: the balance sheet of the streaming giant Netflix

Netflix was considered one of the big winners of the Corona crisis. In the midst of the pandemic, the video service gained more new subscribers last year than ever in its history. At the end of 2020, he had more than 200 million paying customers for the first time. In the meantime, however, there have been signs that the surge in new customers anticipates future demand and the company is facing a corona hangover.

This has now been confirmed in the first quarter, and to an even greater extent than feared: Netflix caused a bitter disappointment with its figures presented on Tuesday after the market closed. In the past three months, there were just under four million additional subscribers, two million fewer than the company had predicted in January.

There were nearly 16 million new customers in the first quarter of 2020, as the pandemic gained momentum. For the second quarter, Netflix is ​​even predicting a further slowdown and only expects a million more subscribers, which fell well short of analysts’ expectations. The company’s share price temporarily lost more than ten percent of its value in after-hours trading.

Low supply due to corona-related production problems?

Netflix blamed itself the demand for the slower subscriber growth. In addition, the company also cited the comparatively low number of new films and television shows on offer due to the pandemic-related production interruptions. This effect will be felt throughout the first half of the year. In the second half of the year there will be a lot more new content, and production is now running almost everywhere in the world. Therefore, the company also gives hope that it will only experience a temporary dent and that it will be able to show faster growth in customer numbers again in the second half of the year.


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To the detailed view

Of course, the slowdown also comes at a time when Netflix is ​​facing much more intense competition. First and foremost is Disney +, the video platform of the entertainment group Walt Disney, which has gained more than 100 million subscribers since it was launched almost a year and a half ago, half as many as Netflix has. Disney has exceeded its expectations by far, originally the company had only promised to reach this mark after 2024. There are also a number of other new competitors such as the HBO Max platform belonging to the AT&T telecommunications group, which was launched just under a year ago.

Netflix, on the other hand, expressly says in its quarterly report that the more intense competition is not a major reason for its own slowed growth. As an indication of this, the company cites that the number of subscribers has developed similarly in all regions of the world, even where competition is less intense. The analyst Eric Haggstrom from the market research group Emarketer still sees the Netflix numbers as a cause for concern, especially with a view to the competition – and as a possible indication that the company is approaching a saturation point in its important American market.