Netflix had a bumper year for subscriber growth in 2020, but that slowed in 2021. Here’s why that happened.
In the first quarter of 2021, Netflix has fallen short of its projected subscriptions and revenue.
While Netflix added new subscribers, the company closed the quarter with a disappointing 208 million subscriptions, two million shy of the 210 million it had forecast. Netflix chalks this up to the COVID-19 pandemic.
Here are two ways the pandemic has affected Netflix’s 2021 earnings so far, along with what the future holds for the company.
1. Unprecedented Membership Growth
Netflix enjoyed unprecedented membership growth due to the pandemic in 2020. According to a Netflix shareholder letter, the company saw over 40 million new subscribers join the service, as a result of many people stuck indoors and looking for entertainment.
Essentially, Netflix ended 2020 with a larger membership and revenue base than it would otherwise have had, translating to record revenues in the first quarter of 2021.
However, as restrictions began to lift worldwide, it meant that the number of new subscribers in 2021 was only going to decrease.
2. Lack of New Content
In a 2021 earnings interview, Netflix CFO Spencer Neumann blames the pandemic for a slow-down in production, resulting in a “lighter content slate”.
Neumann cites this lack of new content as the reason for the slower membership growth reflected in the company’s Q1 results. But if less content was produced, did this lead to subscriber cancelations?
It seems unlikely. In February, a survey from Hub Entertainment Research found that 73% of TV viewers who subscribed to Netflix when the pandemic began said they will “definitely keep” the streaming service.
What’s Next for Netflix in 2021?
Here’s what you can expect from the streaming giant in the months ahead.
New Movies and TV Shows
Netflix expects a rise in paid membership growth in the second half of 2021, banking on original movies and new seasons of hits such as Sex Education and Money Heist.
As state in the Netflix shareholder letter:
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.
Among the big releases Netflix has lined up is Don’t Look Up, which features award-winning cast members Leonardo DiCaprio, Jennifer Lawrence, Cate Blanchett, Timothée Chalamet, and Meryl Streep.
Reduced or Flat Membership Growth
Since it is not expecting a major change in content production until the second half of 2021, Netflix has been careful in its forecast for the second quarter.
The company projects a humbling one million net subscriber additions, a stark comparison to the 10 million net additions in the prior year quarter.
Netflix cites the same pull forward, delayed content production, and general seasonal trends as the reasons, with a flat membership growth in some regions.
Netflix Continues to Dominate the Streaming Landscape
While Netflix has missed the mark in Q1 2021, it clearly still has its loyal subscribers in its corner, and continues to be considered the best streaming service in spite of its production delays.
Plus, with all the exciting content Netflix has lined up, it wouldn’t be remiss to expect it to come back stronger in the second half of the year.
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