Netflix reported its Q1 2021 financials overnight. Here are some of the highlights from the letter to Netflix shareholders:
Revenue grew 24% year over year and was in line with our beginning of quarter forecast, while operating profit and margin reached all-time highs.
We finished Q1’21 with 208m paid memberships, up 14% year over year, but below our guidance forecast of 210m paid memberships. 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 line-up. 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 extraordinary events of Covid-19 led to unprecedented membership growth in 2020, as it pulled forward growth from 2021, and delayed production across every region. In turn, we ended 2020 with a bigger membership and revenue base than we would otherwise have had, contributing to record Q1’21 revenues.
These dynamics are also contributing to a lighter content slate in the first half of 2021, and hence, we believe slower membership growth. In Q1, paid net additions of 4m were below our 6m guidance (and the 16m net additions in the year ago quarter) primarily due to acquisition, as retention in Q1 was in line with our expectations.
We anticipate paid membership growth will re-accelerate in the second half of 2021 as we ramp into a very strong back half slate with the return of big hits like Sex Education, The Witcher, La Casa de Papel (aka Money Heist), and You, as well as an exciting array of original films including the finale to The Kissing Booth trilogy and large scale, star-driven features like Red Notice (starring Gal Gadot, Dwayne Johnson and Ryan Reynolds) and Don’t Look Up (with an all-star cast including Leonardo DiCaprio, Jennifer Lawrence, Cate Blanchett, Timothée Chalamet, and Meryl Streep).
There are several facets to our content strategy. First and foremost, we want to deliver a wide variety of best-in-class stories that our members love and watch in big numbers. Examples of this breadth in Q1 include season one of Firefly Lane (49m chose to watch this title in its first 28 days), season 3 of Cobra Kai (45m), Fate: The Winx Saga (57m), and Ginny & Georgia (52m). Our top movies in Q1 include I Care A Lot (56m), YES DAY (62m), Outside the Wire (66m) and the last instalment of To All the Boys I’ve Loved Before trilogy (51m).
Netflix shares plunge as pandemic boom comes to screeching halt
The boom Netflix enjoyed during the pandemic came to a dramatic halt on Tuesday (US time), when dismal subscriber growth sent its shares plunging as much as 13 per cent, reports the SMH’s Lucas Shaw.
The streaming service added just 3.98 million subscribers in the first quarter, missing Wall Street’s estimate of 6.29 million and its own forecast of 6 million. The current quarter will be even more challenging, with Netflix predicting one million new customers – a fraction of the 4.44 million projected by analysts.