Netflix enjoyed surges in subscriber growth throughout 2020 but the streaming company reported a stark slowdown in new subscriptions during its Q1 2021 earnings report. The company reported that it added 3.98 million new subscribers during the fiscal quarter, sharply missing its own forecast for 6 million new subscriber additions during that period.
Though Netflix beat analysts’ financial expectations, the dour subscriber data caused the company’s stock to drop around 10 percent in afterhours trading. The company’s Q1 subscriber data is a stark contrast to Netflix’s Q1 2020 earnings report, when the company added over 15 million subscribers. The company stated that it had 208 million subscribers at the end of Q1 2021.
While Netflix sharply missed its own forecast for subscriber adds in Q1 2021, a subscription slowdown has long been anticipated. Netflix reaped abnormally large subscriber gains throughout 2020 due to the coronavirus pandemic, which incentivized many consumers to seek indoor entertainment such as streaming services. Company executives repeatedly told investors during Netflix’s various 2020 earnings reports that it expected its viewership and subscriber gains to slow as stay-at-home orders and social distancing mandates were eased, both of which began happening with more frequency in Q1 2021.
Netflix told investors in its Q1 letter to shareholders that it blamed much of Q1 subscriber growth slowdown on its streaming service’s light content slate in the first months of 2021. Netflix stated that it had begun ramping production up on many of its highest-profile films and shows — but none of those projects were released in Q1. Company executives stated that they did not believe increased competition in the streaming industry or Netflix’s October 2020 price hike factored into the subscriber slowdown. On the latter point, Netflix noted that subscriber churn was lower in Q1 2021 than it was in Q1 2020 and argued that that meant “that as we improve the service, we can charge a bit more.”
Netflix forecasted that subscriber growth would be stronger in the latter half of the year due to the streaming service premiering new seasons of popular shows and debuting a handful of upcoming films starring high-profile talents.
“We anticipate paid membership growth will re-accelerate in the second half of 2021 as we ramp into a very strong back half slate with the return of big hits like ‘Sex Education,’ ‘The Witcher,’ ‘La Casa de Papel’ (also known as ‘Money Heist’), and ‘You,’ as well as an exciting array of original films including the finale to ‘The Kissing Booth’ trilogy and large scale, star-driven features like ‘Red Notice’ (starring Gal Gadot, Dwayne Johnson and Ryan Reynolds) and ‘Don’t Look Up’ (with an all-star cast including Leonardo DiCaprio, Jennifer Lawrence, Cate Blanchett, Timothée Chalamet, and Meryl Streep),” Netflix executives said in the letter to shareholders.
While specific release dates for the aforementioned projects were not announced, the statement marks the first time that several of those projects have been officially confirmed to premiere in 2021.
Netflix also teased a handful of international titles that will premiere later in the year, including “Too Hot to Handle” from Brazil and Mexico, a special based on Korean franchise “Kingdom,” Indian action-thriller “Dhamaka,” and new seasons of Brazil’s “Sintonia” and Mexico’s “Control Z.” Netflix has touted the importance of its foreign-language films and television shows in several recent earnings reports and stated in its Q1 2021 shareholders letter that “local titles find significant audiences around the world.” Though Netflix did not discuss its international subscriber growth in its latest letter to shareholders the company stated in January that stated that 83 percent of its 2020 subscriber gains hailed from outside North America.
As for Netflix’s most popular Q1 shows, the company, which does not release viewership data that is verifiable by third parties, said that “Firefly Lane” Season 1 was watched by 49 million users within 28 days of release. “Cobra Kai” Season 3 garnered 45 million views; “Fate: The Winx Saga,” 57 million views, and “Ginny & Georgia,” 52 million views. The streamer’s top films in Q1 included “I Care a Lot,” 56 million views, “Yes Day,” 62 million views, “Outside the Wire,” 66 million views,” and “To All the Boys I’ve Loved Before 3,” 51 million views.