Five ways the virus has changed Netflix

The demand for online entertainment surged when the world crashed earlier this year. But how is Netflix doing after that initial push?

According to its latest results, Netflix added just 2.2 million new subscribers in the three months to Sept. 30, as the surge in demand for its services triggered by the pandemic waned.

While it had warned that a slowdown was likely, the final figure fell below its July forecast of 2.5 million, sending the company’s shares down 5% in after-hours trading.

“The pandemic streaming party has come to an end,” said Paolo Pescatore, analyst at PP Foresight.

Still, Netflix reminded investors that it is still on track to hit a record number of 34 million new subscribers in 2020, or more than 200 million overall.

Netflix said 78 million member households watched The Old Guard, a Netflix original, in the first four weeks after its release, making it the firm’s most popular title in the quarter.

Enola Holmes, Project Power, and The Kissing Booth 2 were also popular, drawing 76 million, 75 million, and 66 million households in the first four weeks after their debut.

Of course, those figures should be taken with a grain of salt: Netflix counts any viewing time of more than two minutes on its account. And the number of viewers he shares is focused on his own original productions.

The number of international Netflix subscribers had already dwarfed those in the US, and overseas growth remains critical.

In the most recent quarter, the strongest subscriber growth was in the Asia Pacific region, which accounted for more than one million new subscribers, nearly half of all subscriptions. The firm boasted that it now claims memberships in a “double-digit” ratio of broadband-connected households in Japan and South Korea.

But the company still gets its highest revenue per user in the US, so retention in your local market is key, especially as competition from rivals like Disney and HBO mounts.

In that regard, Netflix sought to reassure investors, writing in its quarterly update that “retention remains healthy and commitment per member household increased solidly” compared to last year.

The shutdown of film and television productions, forced by the closures this spring, has put a major focus on how Netflix and its competitors will land new offers to retain their members.

Netflix downplayed those concerns, saying it was making “good and careful progress” in production and expected the number of Netflix productions to be released next year to surpass 2020 in every quarter.

Netflix will benefit from the struggles of theater operators, said Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown. But as audiences unable to leave home consume material at a faster rate, costs will rise and could push the company up prices, he warned.

“Original content can keep customers, but it costs a penny and is downright ghoulish for the bottom line,” he said. “If consumers are expected to consume content at a faster rate, the cash flow hole will theoretically widen.”

The firm reported a record $ 790 million in quarterly earnings, as revenue rose more than expected to $ 6.4 billion, thanks in part to the appreciation of the euro against the dollar.

And the firm said its profit margins have also improved, due to the temporary slowdown in production.