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Netflix subscriber growth slows after surging during pandemic

Earlier this year, after the coronavirus shuttered movie theaters and forced people to stay in their homes, Netflix saw a surge in demand.

Article originally published by Forbes. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

Reed Hastings, founder, Netflix speaks onstage at 2019 New York Times Dealbook on November 06, 2019 in New York City.

Getty Images for The New York Times

Topline

Netflix added fewer new subscribers in the third quarter of 2020 than at any other point in the last four years, the company announced Tuesday, ending six months of record-breaking growth when Covid-19 shutdowns caused homebound consumers to turn to the streaming giant.

Key Facts

Netflix signed up 2.2 million new paid subscribers between July and September of 2020, its smallest quarterly increase since 2016, bringing the company’s total number of subscribers worldwide to just over 195 million.

By comparison, the service added 15.77 million subscribers in the first three months of 2020 and 10.09 million between April and June, giving the company its biggest growth spurt in history as viewers turned to streaming services while stuck at home.

Netflix expected growth to slow after coronavirus restrictions were loosened, but Tuesday’s figures fell below both the company’s forecasted 2.5 million new subscribers and the 3.9 million expected by analysts, Reuters reported.

The company expects to add 6 million subscribers in the final three months of 2020.

Key Background

Earlier this year, after the coronavirus shuttered movie theaters and forced people to stay in their homes, Netflix saw a surge in demand. Tens of millions of people joined the streaming service in search of entertainment, sometimes cutting their cable subscriptions in the process. Viewership grew so quickly that Netflix and some of its peers temporarily had to downgrade European viewers’ streaming quality to cope with bandwidth limits. The company expected this uptick to be temporary, predicting growth would slow as consumers emerged from Covid-19 lockdowns, and the third quarter of 2020 appears to meet that expectation. The company also faced backlash last month, and a reported spike in U.S. cancellations, following its release of Cuties, a French-language film that some critics believe sexualized underage actors (the company has defended the film, calling it misunderstood). Still, the company is reporting strong revenue figures and high subscriber counts.

Crucial Quote

“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,” Netflix wrote in a letter to shareholders Tuesday.

Surprising Fact

Some 46% of Netflix’s new subscribers last quarter lived in the Asia-Pacific region, the company said, fueled by growth in Japan and South Korea. The company has worked to expand its footprint beyond the United States in recent years, offsetting a slowdown in U.S. growth by adding new shows that appeal to international audiences.

Tangent

Even though most movie and television studios shut down production over the spring, Netflix says it is not in danger of running out of content. Filming has restarted for most 2021 releases, the company reported, and it expects to grow its stable of original shows next year.


This article was written by Joe Walsh from Forbes and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.

Article originally published by Forbes. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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