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Netflix growth stutters

October 21, 2020

Netflix added 2.2 million new subscribers in the three months to September 30th – significantly lower than the 3.4 million predicted by analysts.

Revenue growth also fell short of expectations as a result, but net profits still rose to $790 million (€667m) from $665.2 million  in the same period last year.

Netflix had already warned investors that the boost in subscribers earlier in the year would slow down, as Covid-19 restrictions were eased and the service had the return of live sport to contend with, as well as Disney+ which is proving a strong rival.

Offering his thoughts on the results, Paolo Pescatore of PP Foresight commented: “It feels like the pandemic streaming party has come to an end. Expectations are always high and tends not to disappoint. In essence, Netflix remains a robust business and will continue to invest heavily in original content which remains paramount.”

“Encouragingly, the company is set to be free-cash-flow positive for the first time since its foray into streaming. This is largely down to a cut in production due to stay at home and social distancing rules. This will likely be reversed next year.”

“Netflix is on course to exceed 200 million by year end. Another milestone for the company and firmly remains the benchmark for rivals who have all restructured their operations with a greater focus on streaming.

“As the company has prospered due to the pandemic, next year looks set to be somewhat challenging. As next round of lockdown measures ease up (and the arrival of a potential vaccine), users will eventually be itching to get out and return back to some form of normality. This coupled with stiff competition from traditional players will inevitably lead to subs losses and overall usage to decline.”

Whilst Martin Garner, COO at CCS Insight, offered:  “As expected, Netflix delivered another record quarter, but subscriber and revenue growth slowed as expected. Paying subscribers reached 195 million. Netflix said in Q2 that it expected some of its growth during the pandemic was, in effect, a one-off boost that pulled forward part of the growth for the rest of the year. As countries strive to get people back to working more normally, the company’s growth is settling back to pre-Covid-19 levels.”

“One huge challenge for the whole TV and movie industry this year was the total shutdown of filming because of the pandemic. Netflix has faced some negative sentiment from having to pause the release schedule for key shows, but it has now restarted filming across many countries. It has completed the main shooting on over 50 titles since March and is on course to complete 150 by year end. The company expects to launch a larger number of original programmes throughout 2021, but long production times mean that new series of some of the most popular shows will only be available in the second half of next year.”

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