Everyone's locked inside, the world looks grimmer than ever, and people are looking for any escape they can get from the day-to-day grind, it's a great time to be Netflix! Or is it? Despite a considerable bump fueled by the pandemic in the first half of 2020, it would seem that earnings have cooled down for the streaming giant. In fact, Netflix failed to meet its new subscriber estimates and overall earnings goal for quarter 3 of 2020, resulting in a significant drop to stock prices.
At its previous forecast, Netflix decided it would aim to reach 2.5 million new subscribers for Q3, which was based on their record breaking first half of 2020. In Q1 and Q2 they reached about 15 million and then 10 million new subscribers, which made their 2.5 goal seem somewhat conservative. However, Netflix correctly supposed that the huge leap in subscribers meant they might find it more difficult to continue growing, and they re-iterated that at this time they are committed to serving currently existing subscribers.
They didn't quite estimate conservatively enough though, and when they only reached about 2.2 million new subscribers, share prices fell about 5% percent as a result. It's not a devastating loss, but it is significant for a company that seemed to be riding high off the back of the nationwide quarantine protocols. For now, the company continues to be optimistic, aiming for 6 million more subscribers in Q4, which, if achieved, would break their record for yearly new subscriptions.
Their strategy seems to be continuing to focus on original programming, with the company announcing they hope to release even more original programs in 2021. “[W]e’re confident that we’ll have an exciting range of programming for our members, particularly relative to other entertainment service options,” they expressed in their statement to shareholders. Netflix has a lot of production work ongoing even with the pandemic, and state that they were "optimistic [they] will complete shooting on over 150 other productions by year-end.” If that truly turns out to be the case, then subscribers will have a lot to look forward to over the next year of of their Netflix membership.
Source: Variety