Netflix’s Pandemic Subscriber Surge Slows, Missing Forecast, After Record First Half


In its previous 2020 earnings calls, Netflix warned investors that its two back-to-back quarters of surging global subscriber growth would slow considerably by the second half of the year. And it looks like that time has come.

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The streaming giant told investors today that it had only added 2.2 million paid subscribers globally in the third quarter, missing its own modest projections of 2.5 million additions. The slowdown in growth was most pronounced in the United States and Canada, where the company added only 180,000 new subscribers compared to the 2.9 million paid subscribers it brought in last quarter. In the region, Netflix counted just over 73 million total subscribers for the quarter.

Netflix executives downplayed the slowdown, which comes after two back-to-back quarters of higher-than-expected growth for Netflix driven by stay-at-home orders and other Covid-19-related shutdowns that prompted a surge in memberships and streaming usage. Netflix reported 15.7 million new subscribers in the first quarter of the year, and 10 million in the second quarter, both of which beat projections and previous comparable quarters.

On a video interview with investors Tuesday, Netflix vice president of finance/investor relations and corporate development Spencer Wang said that if the third quarter had been 48 hours longer, the company’s subscriber numbers would have been slightly over Netflix’s projected 2.5 million subscriber additions.

The company also told investors it expected it would add 6 million new subscribers in the fourth quarter, bringing projected annual growth to 34 million new subscribers. But Netflix’s subscriber growth trajectory is expected to level out further as the effects of the pandemic subside on subscription sign-ups.

“The state of the pandemic and its impact continues to make projections very uncertain, but as the world hopefully recovers in 2021, we would expect that our growth will revert back to levels similar to pre-Covid,” the company said its investors letter. “In turn, we expect paid net adds are likely to be down year over year in the first half of 2021 as compared to the big spike in paid net adds we experienced in the first half of 2020.”

Even with the slowdown in growth, Netflix now boasts slightly more than 195 million subscribers worldwide, and has already surpassed the number of new subscribers it brought into the service than it did in all of 2019. In the first nine months of 2020, Netflix added 28.1 million paid memberships, exceeding the 27.8 million that the company had in the entire previous year.

The company said it expects to break 200 million global subscribers before the fourth quarter is up.

The slowdown in subscriber growth highlights the importance of international growth opportunities, which give streamers more room for growth as the U.S. market saturates. Of the 2.2 million net additions for Netflix, growth in the Asia-Pacific region was more considerable, accounting for nearly half of all Netflix’s quarterly subscriber growth with slightly more than 1 million net additions. Netflix is pursuing local partnerships in India, including mobile operators and payment processors, to help cement the service’s growth in that market.

That international footprint has also been helpful with the return to production, which has hamstrung some other streamers who have shorter turnaround times for their programming. Netflix, which has remained somewhat insulated from the effects of production shutdowns on its content pipeline because it works years out, has returned to production in Europe, the Middle East, Africa and Asia, and is slowly resuming production in Latin America, the United States and Canada.

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