In its first-quarter results, released after the close on Tuesday, the platform reported 3.98mln people signed up to the platform in the three month period, well below forecasts of 6mln. Total paid memberships were up 14% at 207.6mln, again below company forecasts of 210mln.
The company attributed the slowdown in subscriber growth to a “big COVID-19 pull forward in 2020” as well as what it said was a “lighter” content slate over the first half of the year as the pandemic slowed production of new shows.
Revenues, meanwhile, rose 24.2% year-on-year to US$7.16bn, while operating income rose to US$1.96bn from US$958mln.
Despite this, Netflix said it continued to expect a “strong second half” as new seasons of some of its most popular shows returned alongside its film line-up, adding despite short term uncertainty the rise of streaming over TV was “the clear trend in entertainment”.
“Expectations for user growth were always likely to be a hostage to fortune given that they were set at a rather lofty 6m, and with lockdowns set to be eased and the summer months usually a time when people want to go outdoors, there was always this risk that we might see a miss on these numbers”, said Michael Hewson at CMC Markets.
“This appears to have spooked investors who perhaps had their expectations set rather high, however when you look at the number of users added last year, Netflix was always due to see a slowdown”, he added.
However, Hewson said that the revenue numbers suggested recent price increases on the platform “haven’t put too many people off”.
“While today’s market reaction to last night’s user subscriber miss is likely to be a negative one, it doesn’t change the fact that Netflix remains number one in the streaming space, and while this could be considered a setback, it’s unlikely that this slowdown in subscriber growth will translate into a move away to its peers. The likes of Amazon Prime, Disney and Apple are likely to experience the exact same sort of subscriber slowdown as restrictions get eased further”, he said.