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Netflix shares tumble as subscriber growth cools

Glenn CHAPMAN
·3-min read

Netflix shares plunged Tuesday after the leading streaming service reported cooling growth in paid subscriptions that had caught fire during the pandemic.

While revenue jumped 24 percent in the first quarter of this year when compared to the same period in 2020, paid memberships grew less than expected to 208 million, Netflix said in its quarterly earnings release.

New subscriber additions were some two million below Netflix's forecast.

"We believe paid membership growth slowed due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays," executives said in the release.

Netflix reported profit was up to a stunning $1.7 billion on revenue of $7.2 billion, as subscribers weathered price increases.

The Silicon Valley-based company said it expected subscriber growth to accelerate anew later this year as it releases sequels to hit shows.

"We had those ten years where we were growing smooth as silk," Netflix chief executive Reed Hastings said on a streamed earnings call.

"It is just a little wobbly right now."

Netflix executives had cautioned in past quarters that the pandemic fueled a surge in subscriptions, with people who would have eventually signed up jumping on board sooner than they might have.

"We continue to anticipate a strong second half with the return of new seasons of some of our biggest hits and an exciting film lineup," Netflix said in an earnings letter.

A shift from traditional television to streamed services such as Netflix remains a clear trend, according to the company.

However, competition is also ramping up from Disney, Amazon and other titans.

"More and more new streaming services are launching, reinforcing our vision that linear TV will slowly give way to streaming entertainment," Netflix said.

"We’re working as hard as ever to continually improve our service so that we are the best entertainment option available."

But the sharp deceleration suggested slower growth ahead from Netflix, sending shares down some 11 percent in after-hours trade.

Hastings said that competition in the streaming television market has been consistently fierce, with Amazon Prime and Hulu as rivals for more than a decade.

The cooling is a "sign that the world is coming back to more normal at the expense of Netflix," tweeted Gene Munster of the investment firm Loup Ventures. "We think the long-term growth is flattish."

- Shows in the wings -

Productions delays caused by the pandemic have resulted in the release of many original Netflix shows being delayed until the second half of this year, according to the company.

"While the roll out of vaccines is very uneven across the world, we are back up and producing safely in every major market, with the exception of Brazil and India," Netflix said.

The streaming television service expected to spend more than $17 billion on a wide range of content, much of it original.

New seasons of hit shows set for release later this year included Sex Education, The Witcher, La Casa de Papel (Money Heist), and You.

Original films slated to arrive included the finale to The Kissing Booth trilogy; Red Notice starring Gal Gadot, Dwayne Johnson and Ryan Reynolds, and Don’t Look Up which has a cast including Leonardo DiCaprio, Jennifer Lawrence, Cate Blanchett, Timothee Chalamet, and Meryl Streep.

Netflix is also investing in shows made by talent outside the US, finding "locally authentic stories" from around the world resonate with viewers.

"We're increasingly seeing that these local titles find significant audiences around the world, which supports our thesis that great stories are universal," Netflix said.,

Examples of recent local language hits included Lupin, a series based on French novels telling tales of a daring gentleman burglar, according to Netflix.

A second season of Lupin is due out later this year.

gc/caw