Netflix reported 208 million global subscribers as of the end of the first quarter, missing its own prediction for 210 million.
The streaming giant did beat financial targets, though with earnings per share of $3.75 a dollar ahead of Wall Street analysts’ expectations. Revenue of $7.16 billion also topped the Street.
The subscriber shortfall, which caused the stock to drop 11% in aftert-hours trading, was blamed on issues related to the coronavirus pandemic. “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,” the company said in its letter to shareholders. “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. In the short-term, there is some uncertainty from Covid-19; in the long-term, the rise of streaming to replace linear TV around the world is the clear trend in entertainment.”
The subscriber gain paled next to the explosion of 15.8 million new subscribers in the year-ago quarter, when the coronavirus pandemic was in its earliest stage.
In its previous quarterly report, the company had projected it would add six million global subscribers in the first quarter. It also predicted an operating margin in the quarter ending March 31 would rise to 25% from nearly 17% a year ago.
Investors have taken a breather from their long-term Netflix enthusiasm, though the company’s shares have managed to advance about 2% in 2021 to date. Skepticism about the company’s outlook has grown as a number of rival services like Disney+ have hit the market. Apple TV+, Peacock, HBO Max, Discovery+ and Paramount+ have all arrived in the past 18 months alone. Management at Netflix has stayed sanguine, noting they long expected challengers and that the total global market for streaming is in its infancy, with Netflix capturing maybe 10% of it.
Comparisons between the current year and 2020, however, will likely be difficult given the significant tailwind of the pandemic. Tiger King, a breakout reality series and maybe the ultimate talisman of quarantine streaming, premiered March 20 of last year. Lockdowns in Europe and Asia were already well under way at that point. Netflix does not operate in China.
In all of last year, Netflix added 37 million subscribers, most of that in the first half of the year, as executives conceded that there had been a “pull-forward” of new subscribers. In addition to coming into the pandemic with momentum, Netflix also benefited from shutdowns affecting sports and other live events as well as production. Although its giant wheels of production did briefly grind to a halt, Netflix was able to restart them thanks to its global presence, getting cameras rolling again in South Korea, Iceland and other places less impaired by Covid.