Covid-19 dents Netflix projections for paid membership in Q1

Los Gatos, California headquartered video-on-demand platform Netflix fell short of its growth projection of paid subscribers for Q1 2021 due to pandemic-related production delays.  

In its first quarter results, released on Tuesday, Netflix said the number of paid memberships rose by 14% year-on-year. However, this was short two million from the projected 210 million paid memberships it expected.  

“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. 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,” said the shareholder letter issued by the company. 

The company added four million paid memberships for Q1 2021. For Q2, the company expects addition of one million paid memberships, as compared to 10 million in Q2 of 2020, due to ‘pull forward’ of pandemic related slowdown.  

The APAC region, which includes India market, accounted for 1.36 million additions to paid membership for the quarter, down from 3.6 million in Q1 of 2020. The LATAM region accounted for 0.36 million additions while the growth decelerated by 8% year-on-year.  

In response to a question on content spends in the Asia market, co-CEO Reed Hastings said, “We have had enough success in Japan and South Korea for you guys to think about it like Germany or France, like it’s a big developed rich market. We have got that wired. India, we are still figuring things out. And so that investment takes some guts and belief forward-looking.” 

The shareholder letter stated that production of new shows by the platform were on hold in India and Brazil which were facing a second wave of Covid related cases.  

The company executives further added that among its price innovations for India, it was looking at bundled offerings. “The ultimate and easy to pay is it’s just included the sort of bundled offerings that we’ve been doing more and more of, and Jio is a great example of a partner we’ve been working with there to really bring the service to a new demographic at a very, very low price associated with low-cost mobile plans that they are offering as well as home-based IPTV plans,” Greg Peters, COO and CPO at Netflix, said.  

Netflix saw its net cash from operations grow to $777 million for the quarter, up from $260 million in the corresponding quarter last year. The company reported a net income of $1.7 billion for the quarter, more than double from last year. The company generated free cash flow of $692 million for the quarter.